Technology Based Vision and Strategy · 5.2.9.9 Accessibility to Quality Inputs and Services ......
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Transcript of Technology Based Vision and Strategy · 5.2.9.9 Accessibility to Quality Inputs and Services ......
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DRAFT
SCIENCE AND TECHNOLOGY BASED INDUSTRIAL
VISION OF
PAKISTAN’S ECONOMY AND
PROSPECTS OF GROWTH
by
Atta-ur-Rahman N.I., H.I., S.I., T.I.
A. R. Kemal Rehana Siddiqui
Muslehuddin Zafar Mueen Nasir
Munir Ahmad Ejaz Ghani
Muhammad Iqbal Syeda Tanveer Naim
Aamir Matin Shaukat Hameed Khan
Pakistan Institute of Development Economics Quaid-i-Azam University Campus
Islamabad
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Table of Contents LIST OF TABLE ..........................................................................................x LIST OF ACRONYMS ........................................................................................xii PREFACE .......................................................................................xvi FOREWORD ......................................................................................xvii EXECUTIVE SUMMARY .......................................................................................xix NATIONAL SCIENCE, TECHNOLOGY, AND INNOVATION: VISION, STRATEGY AND ACTION PLAN ...............................................................xxiv TOTAL PSDP FINANCIAL ALLOCATION (Rs. in Million) ...............................xxxix CHAPTER 1: INTRODUCTION ........................................................................................ 01
CHAPTER 2: INDUSTRIALISATION AND S&T POLICIES OF NIEs AND PARAMETERS FOR SUCCESS .............................................................................. 04
CHAPTER 3: NATURE OF TECHNICAL CHANGE AND GROWTH OF PRODUCTIVITY IN PAKISTAN ............................................................................... 08
CHAPTER 4: A FRAMEWORK FOR THE INDUSTRIAL GROWTH BASED ON SCIENCE AND TECHNICAL DEVELOPMENT ................................................. 15
4.1 TECHNOLOGICAL UPGRADATION ................................................................. 16
4.2 INDUSTRIAL POLICY ........................................................................................ 18 4.2.1 Raising the Investment Levels .................................................................. 19
4.2.2 Restructuring of Industries........................................................................ 21 4.2.3 Internalising the Benefits from Innovation............................................. 21
4.2.4 Export-Oriented Industrial Policy............................................................ 21 4.2.5 Supply Side of Technology....................................................................... 22
4.3 DEVELOPMENT OF SCIENCE AND TECHNOLOGY.................................. 23
4.4 THE INSTITUTIONS FOR DIFFUSION OF TECHNOLOGY AND RESEARCH AND DEVELOPMENT .........................................................25 4.4.1 Industrial Clusters, Industrial Cities and Zones..................................... 25
4.4.2 Common Facility Centers.......................................................................... 26 4.4.3 Incubators ........................................................................................ 27
4.4.4 Certification ........................................................................................ 27
Annexure 4.1: Development of the Electronic Information Industry in Tianjin ........................ 28
CHAPTER 5: AGRICULTURE ........................................................................................ 30
5.1 INTRODUCTION ........................................................................................ 31
5.2 THE PRESENT STATE OF AGRICULTURE IN PAKISTAN: CROPS SUB-SECTOR ........................................................................................ 32
5.2.1 Wheat ........................................................................................ 32 5.2.2 Cotton ........................................................................................ 33
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5.2.3 Sugarcane ........................................................................................ 33 5.2.4 Rice ........................................................................................ 34 5.2.5 Maize ........................................................................................ 34 5.2.6 Oilseeds ........................................................................................ 34
5.2.7 Research and Infrastructure Projects ....................................................... 35 5.2.7.1 Research Areas............................................................................ 35 5.2.7.2 Infrastructure and Technology Areas...................................... 35
5.2.8 Horticultural Crops..................................................................................... 36 5.2.8.1 Research Areas............................................................................ 36 5.2.8.2 Infrastructure and Technology Areas...................................... 37
5.2.9 General Issues Related to Crop Production............................................ 37 5.2.9.1 Unachieved Yield Potential....................................................... 37 5.2.9.2 Degradation of Land Resources................................................ 38 5.2.9.3 Inefficient Use of Water Resources......................................... 40 5.2.9.4 Research Areas............................................................................ 42 5.2.9.5. Infrastructure and Technology Areas...................................... 42 5.2.9.6 High Post Harvest Losses .......................................................... 42 5.2.9.7 Low Use and Unbalanced Doze of Fertilizer......................... 43 5.2.9.8 Use of Pesticides and Increasing Production Costs ............. 43 5.2.9.9 Accessibility to Quality Inputs and Services ....................... 43 5.2.9.10 Production and Distribution of Certified Seed....................... 44 5.2.9.11 Government Interventions in Agricultural Markets .............. 44 5.2.9.12 Declining Average Farm Size ................................................... 44 5.2.9.13 Status of Agricultural Research in Pakistan ........................... 45
5.3 LIVESTOCK SUB-SECTOR................................................................................... 46 5.3.1 Research Areas ........................................................................................ 48 5.3.2 Infrastructure and Technology Areas ..................................................... 48
5.4 FISHERIES ........................................................................................ 48 5.4.1 Research Areas ........................................................................................ 49 5.4.2 Infrastructure and Technology Areas ..................................................... 49
5.5 FORESTRY AND RANGELANDS ...................................................................... 49 5.5.1 Research Areas ........................................................................................ 50
5.5.2 Action Plan ........................................................................................ 50
5.6 AGRO-PROCESSING ........................................................................................ 51 5.6.1 Milk Production and Processing.............................................................. 51
5.6.2 Fruits and Vegetables Processing............................................................. 52 5.6.3 Action Plan ........................................................................................ 53
5.7 BIOTECHNOLOGY IN AGRICULTURE ........................................................... 53 5.7.1 Micro-propagation and Tissue Culture ................................................... 54 5.7.2 Bio-pesticides ........................................................................................ 54 5.7.3 Bio-fertilizers ........................................................................................ 55
5.7.4 Crop Improvement and Modern Biotechnology.................................... 55 5.7.5 Genome Research ....................................................................................... 56 5.7.6 Action Plan ........................................................................................ 56
Bibliography ........................................................................................ 57
Annexure 5.1: Total Factor Productivity (TFP) Growth Rates for Agriculture ......................... 60 Annexure 5.2: Cropping Intensity at Various Farm Sizes.............................................................. 61 Annexure 5.3: Fertilizer Consumption in Relation to Cultivated Area in Selected Countries ........................................................................................ 62
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Annexure 5.4: Research Expenditure per Scientist in Selected Asian Countries (1980).......... 62 Annexure 5.5: Share of Agriculture and Water in Total PSDP/ADP........................................... 63 Annexure-5.6: Actions Recommended for Realizing Unachieved Potential .............................. 64 Annexure-5.7: Actions Recommended for Arresting Degradation of Land Resources ............ 64 Annexure-5.8: Actions Recommended for Enhancing Water Use Efficiency............................ 65 Annexure-5.9: Actions Recommended for Enhancing Milk and Meat Yield ............................. 65 Annexure-5.10: Actions Recommended for Reduction of Post Harvest Losses........................... 66 Annexure-5.11: Establishment of Quality Testing and Residue Testing Labs.............................. 66 Annexure-5.12: Actions Recommended for Enhancing Productivity of National Agricultural Research System.................................................................. 67 Annexure-5.13: Actions Recommended for Exploitation of Potential in Fisheries ..................... 67 Annexure-5.14: Actions Recommended for Exploitation of Potential of Agricultural .............. 68 Annexure-5.15: Actions Recommended for Development of Milk Processing ........................... 68 Annexure-5.16: Actions Recommended for Development of Fruits & Vegetables Processing ........................................................................................ 69 Annexure-5.17: Summary Table for Costs up to 2009-10 (million rupees).................................. 69 Annexure-5.18: Summary Table for Costs up to 2010-11 to 2014-15 (million rupees).............. 70 Annexure-5.19: Summary Table for Costs up to 2015-16 to 2019-20 (million rupees).............. 70 Annexure-5.20: Cost Benefit Analysis ........................................................................................ 71 Annexure 5.21: Important Issues in Agriculture ................................................................................ 72 Annexure 5.22: PSDP Financial Allocations for Agriculture (Rs. in Millions)........................... 81
CHAPTER 6: TEXTILES ........................................................................................ 82
6.1 INTRODUCTION ........................................................................................ 82
6.2 ISSUES AND CHALLENGES ................................................................................ 82 6.2.1 Low Technological Base........................................................................... 82 6.2.2 Lack of Research and Development........................................................ 84 6.2.3 Issues in Human Resource Development ............................................... 84 6.2.3.1 Spinning Industry........................................................................ 84 6.2.3.2 Weaving Industry........................................................................ 85 6.2.3.3 Knitting Industry......................................................................... 85 6.2.3.4 Dyeing and Finishing................................................................. 85 6.2.3.5 Apparel Sector............................................................................. 85 6.2.4 Low Quality Standards.............................................................................. 86 6.2.5 Production skewed towards low end Commodities .............................. 86 6.2.6 Low Value-Added ...................................................................................... 86 6.2.7 Too Much Reliance on Cotton.................................................................. 86
6.3 STRATEGIC OBJECTIVES AND TARGETS.................................................... 87
6.4 ACTION PLAN ........................................................................................ 87 6.4.1 Improving the Regulatory and Policy Framework ................................ 87 6.4.1.1 Regulatory Framework .............................................................. 87 6.4.1.2 Trade Policy................................................................................. 87 6.4.1.3 Technology Import Policy......................................................... 88 6.4.1.4 Tariff Rationalization................................................................. 88 6.4.2 Human Resource Development................................................................ 88 6.4.2.1 Improving HRD Institutions ..................................................... 89 6.4.2.2 Encouraging the Private Sector to Invest in Skill Enhancement...................................................................... 89 6.4.3 Promoting Research and Development................................................... 89 6.4.3.1 Strengthening Existing Institutions.......................................... 89 6.4.3.2 Establishing New Institutions................................................... 90
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6.4.4 Technological Up-gradation ..................................................................... 91 6.4.5 Building Technological Capabilities ....................................................... 91 6.4.5.1 Firm-based Technology Development.................................... 91 6.4.5.2 Public Technology Institutes..................................................... 93 6.4.6 Rewarding Value Addition........................................................................ 93 6.4.7 Ensuring Quality Standards....................................................................... 93 6.4.8 Encouraging Joint Ventures ...................................................................... 93 6.4.9 Marketing Support ...................................................................................... 93 6.4.10 Establishing Industrial Clusters................................................................ 94 6.4.11 Establishing Common Facility Centers................................................... 94 6.4.12 Establishing Co-operatives for Power/Auto Looms Sector................. 94
Bibliography ........................................................................................ 95
Annexure 6.1: Suggested Projects in Textiles .................................................................. 96 Annexure 6.2: PSDP Financial Allocations for Textiles (Rs. in Millions) ................. 98
CHAPTER 7: THE PAKISTAN LEATHER INDUSTRY ...................................................................... 99
7.1 INTRODUCTION ........................................................................................ 99 7.2 INDUSTRY STRUCTURE ....................................................................................100
7.3 ISSUES AND CHALLENGES ..............................................................................100
7.4 SECTORAL ISSUES ......................................................................................101 7.4.1 Tanning ......................................................................................101 7.4.2 Footwear ......................................................................................101 7.4.3 Garments/Gloves ......................................................................................101 7.4.4 Leather Goods ......................................................................................101 7.5 STRATEGIES, OBJECTIVES AND TARGETS...............................................101 7.5.1 Short term Actions....................................................................................102 7.5.2 Long Term Actions...................................................................................103
Bibliography ......................................................................................104
Annexure 7.1: Thirsty Areas in Leather Trade...............................................................105 Annexure 7.2: Problems faced by the Leather Industry ...............................................106 Annexure 7.3: Projects: Leather Industry .......................................................................108 Annexure 7.4: PSDP Financial Allocations for Leather (Rs. in Millions)................109
CHAPTER 8: MATERIALS ......................................................................................110
8.1 INTRODUCTION ......................................................................................111
8.2 GEOGRAPHICAL MAPPING..............................................................................111
8.3 STRATEGIES FOR EXPLORATION OF MINERAL RESOURCES ..........111 8.3.1 Steel Using Indigenous Iron Ore ............................................................112 8.3.2 Copper and Copper Bearing Gold and Silver ......................................114 8.3.3 Magnesite ......................................................................................115 8.3.4 Glass and Ceramics ..................................................................................115 8.3.5 Composite Materials ................................................................................115 8.3.6 Other Minerals and Materials .................................................................117
8.4 HUMAN RESOURCE DEVELOPMENT...........................................................118
8.5 CONCLUSIONS ......................................................................................119
Bibliography ......................................................................................120
Annexure 8.1: Projects Proposed .....................................................................................121 Annexure 8.2: PSDP Financial Allocations for Materials (Rs . in Millions).............124
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CHAPTER 9: CHEMICAL PROCESS INDUSTRY...............................................................................125
9.1 INTRODUCTION ......................................................................................125
9.2 ISSUES AND CHALLENGES ..............................................................................126 9.2.1 Inorganic Chemicals .................................................................................127 9.2.2 Organic Chemicals ...................................................................................127
9.3 AVAILABILITY OF RAW MATERIAL............................................................128 9.3.1 Inorganic Chemicals .................................................................................128 9.3.2 Organic Chemicals ...................................................................................128
9.4 STRATEGIES AND POLICIES ............................................................................128 9.4.1 Suggested Projects....................................................................................128 9.4.1.1 Indigenous Manufacturing of Reverse Osmotic Membranes (ROM) ..................................................128 9.4.1.2 Fertilizers ...................................................................................128 9.4.1.3 Pesticides....................................................................................129 9.4.1.4 Manufacturing of Fermentation Products.............................130 9.4.1.5 Manufacture of Gum Rasin and Turpentine Oil ..................130 9.4.1.6 Essential Oils .............................................................................130 9.4.1.7 Organic Chemicals from Molasses........................................130 9.4.1.8 Gasohol ......................................................................................130 9.4.1.9 Polyester Fiber...........................................................................130 9.4.1.10 Hydrogen Peroxide...................................................................130 9.4.1.11 Manufacturing of Textile Dyes and Chemicals ...................131 9.4.1.12 Titanium Dioxide......................................................................131 9.4.1.13 Mineral Resources ....................................................................131 9.4.1.14 Inorganic Salts ...........................................................................131 9.4.1.15 Extra Pure Salt Manufacturing Facilities ..............................131
9.4.1.16 Manufacture of Basic Chromium Su lphate..........................131 9.4.1.17 Manufacture of Potassium Chlorate ......................................131 9.4.1.18 Coal ......................................................................................132 9.4.1.19 Smokeless Coal for Fuel..........................................................132 9.4.1.20 Vinyl Acetate Monomer..........................................................132 9.4.1.21 Butyle Acrylate .........................................................................132 9.4.1.22 Naphtha Cracker .......................................................................132 9.4.2 Action Plan ......................................................................................133
9.5 PHARMACEUTICAL SECTOR ..........................................................................133 9.5.1 Issues and Challenges ..............................................................................134 9.5.2 Strategies, Objective and Targets...........................................................134 9.5.2.1 Strategies ....................................................................................135 9.5.3 Action Plan ......................................................................................135 9.5.3.1 Short Term Programs ...............................................................135 9.5.3.2 Medium Term Programs ..........................................................136 9.5.3.3 Long Term Programs ...............................................................137
Bibliography ......................................................................................139
Annexure 9.1: Projects: Chemical Process Industry .....................................................140 Annexure 9.2: PSDP Financial Allocations for Chemicals (Rs. in Millions)...........143
CHAPTER 10: ENGINEERING GOODS INDUSTRY OF PAKISTAN.............................................144
10.1 INTRODUCTION ......................................................................................144
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10.2 ENGINEERING INDUSTRIES OF JAPAN AND NEWLY INDUSTRIALIZED COUNTRIES ......................................................................145
10.3 PAKISTAN’S ENGINEERING SECTOR .........................................................147
10.4 CAUSES OF THE SLOW GROWTH .................................................................147
10.5 DEVELOPMENT OF ENGINEERING SECTOR ............................................148
10.6 STRATEGY FOR DEVELOPMENT ..................................................................149 10.6.1 Technology ......................................................................................149 10.6.2 Human Resource Development .............................................................149 10.6.3 Globalization of Industry.........................................................................150
10.6.4 Policy Framework.....................................................................................150
10.7 GENERAL TARGET AND GROWTH STRATEGY.......................................151
10.8 SPECIFIC TARGETS AND GOALS ..................................................................151 10.8.1 Surgical Instruments, Medical Devices & Appliances Industry ......151
10.8.1.1 Strategy ......................................................................................151 10.8.1.2 Target and Economic Impact .................................................152 10.8.2 Electric Fan Industry................................................................................152
10.8.2.1 Strategy ......................................................................................152 10.8.2.2 Targets and Economic Impact ................................................152
10.8.3 Ceramics Sector ......................................................................................152 10.8.3.1 Target and Economic Impact..................................................153
10.8.4 Machine Tools, Molds & Dies Industry................................................153 10.8.4.1 Major Issues ..............................................................................153
10.8.4.2 Strategy ......................................................................................153 10.8.4.3 Targets and Economic Impact ................................................153
10.8.5 Textile Machinery .....................................................................................154 10.8.6 Electrical Capital Goods..........................................................................154
10.8.6.1 Strategy ......................................................................................154 10.8.6.2 Targets and Economic Impact ................................................154
10.8.7 Pakistan Automotive Industry ................................................................154 10.8.7.1 Major Issues of Auto-industry................................................154 10.8.7.2 Policy & Strategy Direction....................................................155 10.8.7.3 Pakistan Cars/LCVs Industry..................................................156 10.8.7.4 Targets and Economic Impact ................................................156 10.8.7.5 Targets for Trucks and Buses Industry .................................156 10.8.7.6 Pakistan-Motorcycles Industry...............................................156 10.8.7.7 Targets and Economic Impact ...............................................156 10.8.7.8 Tractor and Tractor Parts.........................................................157 10.8.7.9 Targets and Economic Impact ................................................157 10.8.7.10 Auto Parts Industry.................................................................157
Annexure 10.1: Projects Proposed for Engineering Goods Industry............................158 Annexure 10.2: PSDP Financial Allocations for Engineering Industry: (Rs. in Millions) ......................................................................................162
CHAPTER 11: ELECTRONICS ......................................................................................163
11.1 INTRODUCTION ......................................................................................163
11.2 THE GLOBAL SCENARIO...................................................................................164 11.2.1 Global Manufacturing Strategies ...........................................................164 11.2.1.1 Contract Manufacturers (CMs)...............................................164 11.2.1.2 Original Design Manufacturers (ODMs)..............................164
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11.2.1.3 Evolution from Contract Manufacturing to ODM ..............165 11.2.1.4 Original Equipment Manufacturers (OEMs)........................166
11.3 ELECTRONICS AS THE ENGINE OF ECONOMIC GROWTH IN THE ENGINEERING SECTOR OF PAKISTAN …………………….167
11.4 THE STATE OF ELECTRONICS INDUSTRY IN PAKISTAN....................168
11.5 ELECTRONICS INDUSTRY IN PAKISTAN: SWOT ANALYSIS .............168
11.6 STRATEGIC OBJECTIVES ..................................................................................170
11.7 ACTION PLAN ......................................................................................170 11.7.1 Fostering the Existing Industry ..............................................................171 11.7.2 Attracting Foreign Direct Investment....................................................171 11.7.3 Human Resource Development..............................................................171 11.7.4 Strengthening and Developing R&D Capabilities ..............................172
11.7.4.1 Strategies for Strengthening R&D Activities.......................173 11.7.4.2 Encouraging firm-based R&D through Incentives .............174 11.7.4.3 Establishing Technology Incubators .....................................174
11.7.5 Promoting Specific Projects....................................................................175 11.7.5.1 Manufacturing of Printed Circuit Boards (PCB).................175 11.7.5.2 VLSI Design/Training Center.................................................175
11.8 LONGER-TERM STRATEGIES ..........................................................................175 11.8.1 Moving into a higher Technology Plane...............................................175 11.8.2 Developing the Supply Chain .................................................................176
11.9 PROJECTS OF NATIONAL IMPORTANCE....................................................176
Bibliography ......................................................................................177
Annexure 11.1: Suggested Projects in Electronics ..........................................................178 Annexure 11.2: PSDP Financial Allocations for Electronics (Rs. in Millions)..........181
CHAPTER 12: ENERGY-POWER ......................................................................................182
12.1 INTRODUCTION ......................................................................................182
12.2 ENERGY TRENDS IN PAKISTAN:...................................................................183
12.3 POWER ......................................................................................184
12.4 EXPANSION IN SUPPLY OF POWER..............................................................184
12.5 ALTERNATIVE SOURCES OF POWER SUPPLY.........................................186 12.5.1 Micro/Mini Hydel Units .........................................................................187 12.5.2 Wind Energy ......................................................................................187 12.5.3 Solar Energy ......................................................................................188
12.6 ENERGY CONSERVATION ...............................................................................188
12.7 CONCLUSIONS ......................................................................................189
Bibliography ......................................................................................190
Annexure 12.1: Projects Proposed......................................................................................191 Annexure 12.2: PSDP Financial Allocations for Energy (Rs. in Millions).................193
CHAPTER 13: TELECOMMUNICATION ......................................................................................194
13.1 INTRODUCTION ......................................................................................195
13.2 TELECOM INFRASTRUCTURE ........................................................................195 13.2.1 Value Added Services in Telecom.........................................................197
13.2.1.1 Premium Rate Service (PRS)..................................................197
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13.2.1.2 Card Pay Phone Service...........................................................197 13.2.1.3 Pre-paid Calling Card Service (PCCS) .................................197 13.2.1.4 Customer Services Centers/Telegraph Offices ....................198 13.2.1.5 Voice Over Internet Protocol Service (VOIP).....................198 13.2.1.6 Digital Subscriber Lines Service (DSL) ...............................198 13.2.1.7 Mobile Services.........................................................................198 13.2.1.8 Wireless Payphone Service (WPS)........................................198 13.2.1.9 Data Communications & Internet Services ..........................198 13.2.1.10 SEA -ME-W E-4 .......................................................................199 13.2.1.11 Intelligent Network (IN) ........................................................199 13.2.1.12 Billing System .........................................................................199
13.3 DEMAND FORECAST ......................................................................................199
13.4 MAJOR ISSUES IN THE TELECOM SECTOR...............................................200
13.5 STRATEGY/ACTION PLAN................................................................................200
Annexure 13.1: Telecom Sector De-regulation................................................................202
CHAPTER 14: INFORMATION TECHNOLOGY ...................................................................................207
14.1 INTRODUCTION ......................................................................................207 14.1.1 Contribution of IT towards Growth in GDP ........................................208
14.2 ISSUES AND CHALLENGES ..............................................................................208 14.2.1 Low Productivity in Software Services.................................................208 14.2.2 Lack of awareness and top management commitment ......................208 14.2.3 Quality of professional IT and managerial staff ..................................209 14.2.4 Negative country perception ..................................................................209
14.3 STRATEGIES, OBJECTIVES AND TARGETS...............................................209 14.3.1 E-Government Strategy ...........................................................................209 14.3.1.1 E-Government Results.............................................................210 14.3.2 Exports of IT and IT enabled services ..................................................210 14.3.2.1 Strategy to promote exports of IT and ITeS.........................211 14.3.2.2 Three year targets for exp ort of IT, IT enabled services ...212 14.3.3 E-Readiness ......................................................................................212
Annexure 14.1 PSDP Financial Allocations for IT (Rs. in Millions)..........................215
CHAPTER 15: FINANCIAL SECTOR ......................................................................................216
15.1 INTRODUCTION ......................................................................................216
15.2 MAJOR ISSUES AND THE REFORM PROCESS ..........................................216 15.2.1 Financial Liberalization ...........................................................................216 15.2.2 Globalization and International Capital Flows ....................................217 15.2.3 Role of the Central Bank .........................................................................217 15.2.4 Governance in the Financial Sector.......................................................218 15.2.5 Capital Market Development..................................................................218 15.2.6 Technological Improvements .................................................................218 15.2.7 Diversified Co mmercial Banking ..........................................................219 15.2.8 Reducing Non-performing Loans (NPLs)............................................219 15.2.9 Capacity Building .....................................................................................219 15.2.10 Efficiency Indicators of the Reform Process........................................219
15.3 STRATEGIC OBJECTIVES ..................................................................................220
15.4 ACTION PLAN ......................................................................................220
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15.4.1 Use of Information Technology.............................................................220 15.4.2 Risk Management for e-banking ...........................................................221 15.4.3 Facilitation and Supervision ..................................................................222 15.4.4 Capacity Building .....................................................................................222 15.4.5 Deposit Insurance System.......................................................................223 15.4.6 Reducing the Risks attached with External Sector Vulnerability.....223
Bibliography ......................................................................................226
CHAPTER 16: CONSTRUCTION AND HOUSING SECTOR .............................................................227
16.1 INTRODUCTION ......................................................................................227
16.2 PROBLEMS IN THE HOUSING SECTOR .......................................................228
16.3 ACTION PLAN FOR THE HOUSING SECTOR .............................................228
16.4 ROLE OF SCIENCE AND TECHNOLOGY .....................................................229
16.5 HOUSING FOR POOR ......................................................................................231
16.6 CONCLUSIONS ......................................................................................232
Bibliography ......................................................................................233 Annexure 16.1: PSDP Financial Allocations for Construction (Rs. in Millions).......234
CHAPTER 17: TRANSPORT SECTOR ......................................................................................235
17.1 INTRODUCTION ......................................................................................236
17.2 MAJOR ISSUES ......................................................................................236 17.2.1 Road Transportation.................................................................................237
17.2.1.1 Issues in Road Transportation................................................237 17.2.1.2 Strategies ...................................................................................239 17.2.1.3 Urban Transportation...............................................................239
17.3 RAILWAY TRANSPORTATION........................................................................240 17.3.1 Major Issues of Railway Transportation...............................................241 17.3.2 Goals and Strategies .................................................................................241
17.4 AIR TRANSPORTATION.....................................................................................241 17.4.1 Major Issues of the Air Transport..........................................................242 17.4.2 Goals and Strategies .................................................................................242
17.5 MARINE AND INLAND WATER TRANSPORTATION ............................242 17.5.1 Major Issues of the Marine Transport ...................................................242 17.5.1.1 Trade Transport Logistics System.........................................242 17.5.1.2 Lack of Investment ..................................................................242 17.5.1.3 High Handling Cost..................................................................242 17.5.1.4 Private Sector Involvement.....................................................243 17.5.1.5 Development of Shipping Industry........................................243 17.5.2 Goals and Strategies ................................................................................243
Annexure 17.1 Different Road Projects ...........................................................................244 Annexure 17.2 PSDP Financial Allocation (Rs. in Million).........................................246 Annexure 17.3 PSDP Financial Allocation: (Percentage Share in Total Allocation)................................................249 Annexure 17.4 PSDP Financial Allocation: (Percentage Share in GDP) .....................................................................250 List of Experts/Consultants ......................................................................................255 List of Committees / Members ......................................................................................263
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Strategic industries ......................................................................................267 Strategic Technologies ......................................................................................269
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LIST OF TABLES Table 3.1 Annual Average Labor Productivity Growth (%): 1992-01 12
Table 3.2 Trends in Total Factor Productivity (TFP) in Overall Economy Since 1960s 13
Table 3.3 Trends in Total Factor Productivity (TFP) in Agriculture Sector Since 1960s 13
Table 3.4 Trends in Total Factor Productivity in Manufacture Sector Since the 1960s 14
Table 3.5 Human Resource Development Activities 14
Table 5.1 The “Extension Gaps” for Various Agricultural Commodities 38
Table 5.2 The “Research Gaps” for Various Agricultural Commodities 38
Table 5.3 Gap from World’s Highest Average Yield 38
Table 5.4 Distribution of Land Use in Pakistan 39
Table 5.5 Extent of Saline/Sodic Soils in Pakistan and Associated Productivity Losses 40
Table 5.6 Average annual water supplies for irrigation of the Indus Plain 41
Table 5.7 Water Availability at the Farm Gate 41
Table 5.8 Estimated Post Harvest Losses for Different Fruits in Sindh 42
Table 5.9 Average Farm Size in Pakis tan 45
Table 5.10 Percentage of Farm Numbers and Farm Area by Farm Categories in 1999-2000 45
Table 7.1 Structure of Leather Industry 100
Table 8.1 Geological Survey of Pakistan 111
Table 8.2 Property Class cum End-Use Classification 112
Table 8.3 Steel Mill at Nokundi 113
Table 8.4 Opening up of Other Steel Mills 114
Table 8.5 Beneficiation of Indigenous Iron Ore 114
Table 8.6 Beneficiation of Copper 115
Table 8.7 Development of Advanced Refractories 115
Table 8.8 Development of Polymeric Materials and Photonic Materials 116
Table 8.9 Development of other Minerals and Materials 116
Table 8.10 Development of other Minerals and Materials 118
Table 8.11 Training of Manpower 118
Table 9.1 Pakistan’s Imports 126
Table 9.2 Supply/Demand Position 129
Table 9.3 Data on Imports, Demand and Local Formulation of Pesticides 129
Table 10.1 The World Trade in Different Products 144
Table 10.2 Share of Development & Developing Countries in Production of Engineering Goods
145
Table 10.3 Economic Performance of Different Countries 146
Table 11.1 Contribution of the Engineering Sector in Pakistan’s Economy 168
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Table 12.1 Energy Situation in Pakistan 182
Table 12.2 Energy Intensity (1990-91/2001-02) 183
Table 12.3 Future Growth Rates of Energy Demand 184
Table 13.1 Increased Capacity and Working Connections (1998-2003) 196
Table 13.2 Promotion of ICT and Bridging the Digital Divide Tele Density Trends (June 2003)
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Table 14.1 Future Investment Program 213
Table 14.2 Portfolio of Major Projects 214
Table 15.1 Efficiency Indicators of Financial Sector 224
Table 15.2 Indicators of Financial Depth and Efficiency 225
Table 16.1 Housing Needs In Pakistan 228
Table 16.2 Improvements in Materials 229
Table 16.3 Standardization of Materials 230
Table 16.4 Infrastructure 231
Table 17.1 Summary of Transportation Statistics 236
Table 17.2 Road Length and Density 237
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LIST OF ACRONYMS AAB Automatic Alternative Billing
ADP Asian Development Bank
ALMs Automated Loan Machines
APO Asian Productivity Organization
APTMA All Pakistan Textiles Manufacturers Association
AWC Air Weapons Complex
BMR Balancing, Modernization and Replacement
BOOT Build-own -operate and Transfer
BTX Benzene Toluene & Xylene
CAD Computer Aided Design
CAM Computer Aided Manufacturing
CBR Central Board of Revenue
CD Call Distribution
CDC Central Depositary Company
CEE Centre of Excellence in Electronics
CFMS Computerized Fault Management System
CIB Central Information Bureau
CIRC Corporate Industrial Restructuring Corporation
CLCV Cotton Leaf Curl Virus
CMs Contract Manufacturers
CTRL Central Telecom Research Laboratories
CWHR Council for Works and Housing Research
DACCS Digital Access Cross Connect Systems
DAP Diammonium Phosphate
DC Digital Communications
DCR Destination Call Routing
DFI Development Finance Institutions
DFM Design for Manufacture
DIS Deposit Insurance System
DNOPs Data Network Operating Companies
DRC Domestic Resource Cost
DSL Digital Subscriber Lines Service
DSP Digital Signal Processing
ECO Economic Cooperation Organization
EDB Economic Development Board
EDW Enterprise Data Warehouse
EPA Environmental Protection Agency
EU European Union
FDI Foreign Direct Investment
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FECs Foreign Exchange Companies
FMD Follow me Diversion
FRP Fiber Reinforced Polymer
FSC&R Federal Seed Certification and Registration
FTZ Free Trade Zone
GDP Gross Domestic Product
GOP Government of Pakistan
HBL Habib Bank Limited
HEC Higher Education Commission
HID Hardware Industry Development
HRD Human Resource Development
ICCS International Collect Call Service
ICT Information and Communication Technologies
IITs Indian Institutes of Technology
IN Intelligent Network
IPM Integrated Pest Management
IPNS Integrated Plant Nutrition System
IPPS Independent Power Producers
IPR Intellectual Property Rights
ISPs Internet Service Providers
IT Information Technology
JVs Joint Ventures
KAIS Korea Advanced Institute of Science
KANUP Karachi Nuclear Power Plant
KESC Karachi Electric Supply Corporation
LDI Long Distance & International
LL Local Loop
LPS Lactoperoxadise System
MAF Million Acre Feet
MAS Mass Calling
MCB Muslim Commercial Bank
MESCO Multan Electric Supply Corporation
METI Ministry of Economy, Trade and Industry
MFA Multi Fiber Arrangement
MINFAL Ministry of Food, Agriculture & Livestock
MNCs Multinational Corporations
MoST Ministry of Science and Technology
MUTs Model Universities of Technology
NAB National Accountability Bureau
NARC National Agriculture Research Council
NARS National Agricultural Research System
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NBP National Bank of Pakistan
NDS Negotiated Dealing System
NEPRA National Electric Power Regulator Authority
NFDC National Fertilizer Development Center
NHA National Highway Authority
NIBGE National Institute for Biotechnology and Genetic Engineering
NICs Newly Industrialized Countries
NIE National Institute of Electronics
NIEs Newly Industrialized Economies
NPLs Non-performing Loans
NTC National Telecommunications Corporation
NTDC National Transmission and Dispatch Company
NWFP North West Frontier Province
ODMs Original Design Manufacturers
OEMS Original Equipment Manufacturers
OEMs Original Equipment Manufactures
OMOs Open Market Operations
PACRA Pakistan Credit Rating Agencies Limited
PAF Pakistan Air Force
PARC Pakistan Agriculture Research Council
PCB Printed Circuit Boards
PCCS Pre-paid Calling Card Service
PCSI Pakistan Cotton Standards Institute
PCSIR Pakis tan Council of Science and Industrial Research
PCST Pakistan Council for Science & Technology
PEPCO Pakistan Electric Power Company
PIAs Pakistan International Airlines
PIDA Provincial Irrigation and Drainage Authority
PIDE Pakistan Institute of Development Economics
PMDC Pakistan Mineral Development Corporation
PRS Premium Rate Service
PSDP Public Sector Development Programme
PSF Polyester Staple Fiber
PTA Pure Terephthalic Acid
PTCL Pakistan Telecommunications Company Ltd
PVC Poly Vinyl Chloride
QAU Quaid-I-Azam University
R&D Resource & Development
REPCO Rawalpindi Electric Producer Company
ROM Reverse Osmotic Membranes
RP Research Potential
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RTGS Real Time Gross Settlement
S&T Science and Technology
SAARC South Asian Association for Regional Cooperation
SAR Structure Activity Relationships
SBP State Bank of Pakistan
SCARPs Salinity Control and Reclamation Projects
SECP Securities and Exchange Commission of Pakistan
SLM Service Level Management
SMEs Small and Medium Enterprises
SPL Split Charging
SWIFT Worldwide Interbank Financial Telecommunication
TDP Telecom Deregulation Policy
TEVTA Technical Education and Vocation Training Authority
TFCs Term Finance Certificates
TFP Total Factor Productivity
TV Television
UAN Universal Access Number
UBL United Bank Limited
UDR User Defined Routing
UHT Ultra High Temperature
UNCTAD United Nations Conference on Trade and Development
UNDP United Nations Development Programme
UNIDO United Nations Industrial Development Organization
UPN Universal Personal Number
UPT Universal Personal Telecommunication
VAM Vinyl Acetate Monomer
VAM Vinyl Acetate Monomer
VLSI Very Large Scale Integration
VOIP Voice Over Internet Protocol Service
VPN Virtual Private Network
VTI Vocational Technical Institutions
WAPDA Water and Power Development Authority
WB World Bank
WHO World Health Organization
WPS Wireless Payphone Service
WTO World Trade Organization
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PREFACE
This report presents a strategy for socio-economic development and rapid economic growth, with a pivotal focus on science and technology. Based on in-depth analyses of major productive sectors of the economy, the report identifies key issues and challenges, sets outs strategic objectives and targets, and spells out detailed action plans to realize the desired goals.
The report is the outcome of a joint effort, involving the Higher Education Commission and the Pakistan Institute of Development Economics, to devise a framework which would form the basis for the formulation and implementation of programmes designed to help our economy attain greater competitiveness. The report has been prepared through a consultative process that involved frequent interactions with industry leaders, academic ians, and senior policymakers.
We have benefited immensely from the guidance of Prof. Dr. Atta-ur-Rahman, Chairman Higher Education Commission, who took deep interest in the project and provided valuable insights through out the stages of the project. We would also like to thank Dr. S.T.K Naim, formerly Chairperson of the Pakistan Council for Science and Technology, who, through her intellectual input and administrative support, has been instrumental in making this project come to fruition. Thanks are also due to members of various committees for their expert advice, to colleagues in the PIDE who have contributed to this volume, to Mr. Zamir A. Awan for his able coordination, and to Mr. M. Afsar Khan and S. Zaheer Abbas Shah for their assistance in the preparation of this report.
Director Pakistan Institute of Development Economics ISLAMABAD
A. R. Kemal
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FOREWORD We now live in a world in which knowledge has become the key drive for socio-economic development. Only those countries are able to march forward and progress rapidly which invest in their human resources, tap into the creativity of their young and harness their potential for development. Human resources therefore need to be adequately trained so that they can play their due role to develop a knowledge-economy in the highly competitive global environment. It is essential to identify specific sectors in which Pakistan should invest so that it can achieve a high growth target and achieve rapid development. The report therefore identifies key prioritized areas in which our planning should be focused over the next decade or so, and covers the major productive sectors of the economy including agriculture, industry and services. In the compilation of this document a number of think tanks were formed in different sectors including agriculture, textiles, leather, materials, chemicals process industries, pharmaceuticals, engineering goods, electronics, energy, telecommunication, information technology, construction and housing as well as transportation. In each sector the teams of professionals included representatives from the government, private sector, subject experts as well as economists. In order to achieve rapid growth in each sector we will need to substantially strengthen research and development efforts and create the necessary quality human resources which can face the challenges of globalization and international competition. While agriculture is the largest sector of the economy and over 60% of the population of Pakistan relies on this sector for its livelihood, our crop yields remain low and the share of agriculture in the total PSDP/ADP has declined from 12.78% in 1981 to only 0.94% presently. It has been estimated that appropriate investments in agriculture in carefully selected areas as indicated in the document are expected to generate an internal rate of return of about 150% and would lead to poverty alleviation at the grass-roots. The engineering industry constitutes one of the fastest growing economic sectors in the world and the share of the engineering industry in overall world trade has increased from 55% in 1990 to 63% in 2002. In Pakistan however its contributions to exports have remained negligible. The report presents a strategy of what needs to be done by Pakistan in order to embark on the same path as Japan, Korea and China. Similar strategies and prioritized areas of investment have been identified in respect of other important sectors such as the chemicals and pharmaceuticals industry, new materials, construction and housing industry, information technology etc. In all these sectors the key driver for development will need to be quality human resources, trained in the areas indicated in this report. To achieve these objectives the Higher Education Commission will be required to play a central role by launching massive programmes for development of high human resources so that a cadre of about 50,000 M.Sc. level and about 15,000 Ph.D. level scientists and engineers can be trained over the next decade in order to transform the vision laid down in this document into a reality. This project was undertaken by the Higher Education Commission (HEC) and the Pakistan Institute of Development Economics (PIDE), commissioned to prepare a document which lays out a clear blue-print for national development after wide consultation with subject experts and the private sector. The resulting document, Technology – Based Industrial Vision and Strategy for Pakistan’s Socio -Economic Development is a result of these deliberations and lays down the framework for the future development of the country. It is now essential that the recommendations be integrated into the national development plans and be implemented effectively in order to build the Pakistan of tomorrow.
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I would like to express my deepest thanks to Dr. S.T.K. Naim, former Chairperson of Pakistan Council for Science and Technology who has been closely involved in the deliberations and in the development of this document. The Pakistan Institute of Development Economics led by Dr. A.R. Kemal deserves our fullest appreciation for producing this important national document. I also wish to express my sincere gratitude to all the persons who were involved in the consultation process and without whose help this document would not have materialized. Their names are given on pages 255-266. The introductory section written by me entitled “National Science, Technology and Innovation: Vision, Strategy, and Action Plan” provides directions for the socio-economic development of Pakistan.
Prof. Dr. Atta-ur-Rahman N.I., H.I, S.I., T.I.
Ph.D. (Cambridge), Sc.D. (Cambridge)
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EXECUTIVE SUMMARY
There is overwhelming evidence that countries that have invested heavily in science and technology have succeeded in achieving rapid and sustained economic growth. In this era of globalization and competition, Pakistan needs to acquire scientific and technological capabilities to maintain a competitive edge in the global marketplace. The vision presented in this document places science and technology at the centre of an industrial strategy whose overriding aim is to develop a fast growing, internationally competitive, and export-driven industrial sector that helps in poverty reduction through the provision of adequate employment opportunities to the growing labour force.
The two major themes that cut across this report are: (i) Human Resource Development, and (ii) Research and Development. The report recommends a number of measures for the development of human resources through education and training as well as for promoting research and development. These include: strengthening existing institutions; establishing new institutions with emphasis on emerging technologies; training professionals and workers in line with market demand; creating effective linkages among academic institutions, research centres, and industry; providing incentives to the private sector to invest in human resource development as well as to carry out research and development; and establishing technology incubators and specialized technology parks.
The report carries out an in-depth analyses of the major sub-sectors of all the three productive sectors of the economy — agriculture, industry, and services — and within each sub-sector identifies key issues and challenges, sets outs strategic objectives and targets, and spells out a detailed action plan to realize the vision.
Agriculture is the largest income and employment-generating sector of Pakistan’s economy. However, it continues to suffer from low productivity crop yields on an average farm are lower by 31-75 % than the yields on progressive farms, while the latter’s productivity is 25-57 % less than the technology potential realized at the research stations. The major reasons for such gaps are lack of seed varieties, resistance to pests and diseases, low genetic potential, drought and high temperature stress, soil nutrient mining and salinity/water logging, unbalanced and use of low quality inputs and inputs use low efficiency on the one hand, and lack of quality control, low value addition and high post-harvest losses on the other. The losses in agricultural output due to salinity/water logging are more than 21 billion rupees per annum, and post-harvest losses for fruits and vegetables alone are upto 49 billion rupees every year.
A sustained growth rate of five to six per cent in agriculture is imperative to ensure a rapid growth in national income, macroeconomic stability, improvement in distributive justice and a reduction in poverty. This can be realized by exploiting the unachieved potential of all the sub-sectors of agriculture, diversifying agricultural production towards high value crops, and conserving land and water resources. A higher level of investment in agricultural research and development (R&D) activities supported by favorable policy instruments, human resource development, and necessary physical and institutional infrastructure can prove a catalyst towards achieving enhanced productivity and the desired growth rate.
The textiles and clothing sector is the mainstay of Pakistan’s economy. With a 24% share in the value-added of the manufacturing sector, the textiles sector employs 38% of the workforce in the industrial sector, and constitutes roughly 70% of total exports. The textiles sector is facing a number of challenges including a low technological base, lack of research and development, lack of trained manpower, low quality standards, concentration in low value-added products, and too much reliance on cotton. To address these challenges and to facilitate the transformation of
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the textiles sector into a strong, dynamic, and internationally competitive industry led by the private sector, the public sector must create an enabling environment through a business friendly regulatory framework, appropriate incentives to the private sector, institutional support and provision of quality infrastructure.
Key elements of the proposed action plan for the textiles sector include: improving the regulatory and policy framework; human resource development through improving the HRD institutions and encouraging the private sector to invest in skill enhancement; promoting research and development through strengthening of the existing institutions and establishing new institutions in the areas of garments, knitwear, sample development, and CAD/CAM centres; technological up-gradation; rewarding value addition; ensuring quality standards; and establishing common facility centres.
Leather and leather products play a significant role in Pakistan’s economy. The leather industry is mainly export-oriented and has a potential to grow rapidly provided measures are put in place to encourage value addition as well as to improve product quality. Environmental pollution is a major issue and non-compliance with environmental standards could hamper Pakistan’s exports. There is a need for national environmental legislation to curb the growing tannery effluent problem. The tanneries could benefit from R&D in order not only to cut down on polluting effluents, but also to recycle many of the discharges. In addition, effluent treatment facilities need to be established in order to limit the environmental damage caused by the direct dumping of untreated effluent.
The beneficiation and development of new materials is critical for economic growth and competitiveness. Recent advances have changed the complexion and use of materials in many industries, particularly in the areas of defence, electronics, engineering, transport, energy and sport. Though Pakistan has a strong mineral base as compared with many developing countries, it has not been able to extract maximum potential benefits from its mineral base.
The report recommends a number of measures for the development of materials utilizing the indigenous resources, beneficiation of minerals, and development of new materials especially the composites. These include: acquisition of technology exploiting domestic reserves of iron ore for the production of steel; establishment of mini steel mills utilizing this technology at various sites like Nokundi, Kalabagh and others; establishment of research centre for copper and other precious metals; establishment of a centre for the development and improvement in refractory bricks like magnesite refractory bricks; promotion of research on gypsum; GRP/FRP development centre for the development of composite materials; establishment of an institute for theoretical research on materials; opening up of departments for advanced studies in materials in various universities; establishment of centres for the development of polymeric and photonic materials; establishment of geo-data and geo-mapping centres; and research and development for the exploitation of resources of gemstones.
The chemical process industry is crucial for industrial development. Almost all the manufacturing sectors depend on the inputs which are produced by the chemical industries. The industry is complex and is highly capital and technology-intensive. Whereas some chemical industries including fertilizers, polyesters, pure terephthalic acid (PTA), poly vinyl chloride (PVC) and some basic chemicals have been developed, most of the chemical industry in Pakistan is still in the initial stages of development. For the establishment of a fully integrated chemical industry in Pakistan, it is imperative that a naphtha cracker is set up in the country. This facility is critically important for the indigenous manufacturing of a large number of chemicals and pharmaceuticals.
Whereas Pakistan has attained a high degree of self-sufficiency in the formulation and packaging of finished pharmaceutical products, the basic manufacturing of ingredients is very small. About 90% of active ingredients are imported. Pakistan needs to develop capacity for the essential ingredients especially where local resources are available . The key elements of the
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action plan for the development of the pharmaceutical sector include: introduction of a diploma course in pharmacy technology in the faculties of pharmacy; establishment in each province of a fully equipped laboratory to undertake basic research in the field of pharmaceutical drugs and medicine for disease prevention; establishment of R&D centres in pharmaceutical and drug discovery and experimental therapeutics; establishment of testing/certifying laboratories approved by the WHO; and establishment of manufacturing laboratories for fabrication and manufacturing of basic equipment required in pharmaceutical industry.
There is a need to diversify into fast growing sectors like engineering and electronics. Engineering industry is one of the most dynamic industries in the world having great potential for growth. The main strategic focus in the engineering sector is on bridging the widening technological gap with the developed countries by providing conducive environment including the required technological, financial and physical infrastructures, and creating a seamless integration with emerging trends of global production systems. The most important step for the promotion of engineering sector in Pakistan is to allocate more resources to technical education, the lack of which has been identified as one of the reasons for the limited progress in the engineering sector. There is also a need to develop design engineering capabilities, databases and infrastructure, create testing laboratories and instruments, and initiate public -private partnership in projects leading to innovation of new products and processes.
The electronics industry is one of the world’s fastest growing industries. It is a key enabler of growth and innovation, underpinning many important industries including Automotive, Information and Communication Technologies (ICT), Consumer appliances, defence, biomedical appliances and other scientific equipment and devices. Despite its huge growth potential, Pakistan has significantly lagged behind in the development of its electronics industry. The electronics activity in Pakistan mostly consists of repair and assembly of electronics equipment. Electronics manufacturing and design activities are largely non-existent, not least because of lack of core competencies in electronics, including highly qualified manpower and R&D capabilities. Electronics is a highly innovative field where new developments are taking place at a very fast pace. In this scenario, countries like Pakistan that have yet to make a mark in the field of electronics have to go a long way before an electronics industry that is capable of attaining international competitiveness can be developed. The objectives of a development strategy for the electronics sector are to: build on the existing capabilities in electronics; attract FDI in electronics sector to facilitate the transfer of technology; strengthen the capability in assembly and testing of electronic components; develop and enhance value-added in the industry by moving into activities such as research and design; and support the development of indigenous supply chain.
For the electronics sector to emerge as one of the key drivers of growth in Pakistan, a coherent action plan is needed whose key elements include: creation of a business-friendly environment that is conducive for both domestic and foreign investment in the electronics sector; human resource development especially in the emerging areas of Digital Signal Processing (DSP), Optics, Digital Communications (DC), and Microelectronics; development of indigenous R&D capabilities; establishment of VLSI design and training centres; and development of specialized technology parks with quality infrastructure to support the concentration of high-tech industries.
The goals of the industrial vision cannot be realized without an efficient energy sector. The supply-demand analysis shows that even with modest economic growth, the current rate of change in supply will result in power shortages in Pakistan, adversely affecting the growth process. Therefore, Pakistan needs to concentrate not only on the expansion of energy sources but also on improving efficiency of resource use. For expansion of power supply it is important to increase the supply of power from traditional sources like hydel, thermal and nuclear and from other sources like building micro/mini hydel power units, solar and wind power units. For hydel
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power supply WAPDA has proposed a number of projects. The first option is Bhasha Dam/Kalabagh Dam. However this will increase the supply of energy in the long term. In the short run, thermal power units can help to reduce power shortage. However, the cost of thermal power generation is high. With the rising price of furnace oil it may not be possible to supply power at a lower cost. Since coal can be an important input, thermal power generation through development of clean coal technologies and beneficiation techniques is proposed. Construction of mini-hydel plants, wind power plants and solar power plants can increase the power supply in remote areas and thus contribute to their economic development.
Industrial development and expansion has to be complemented by a dynamic and efficient services sector including telecommunications, information technology, and financial and transport services. The telecommunications sector has made significant progress in recent years; however the country still lags behind many of the comparable economies in terms of fixed line density (number of fixed phones per 100 inhabitants), mobile penetration (number of mobile subscribers per 100 inhabitants) and internet usage. Pakistan must develop and maintain a high quality telecommunication infrastructure for the provision of affordable world class telecom facilities. The major recommendations include: an enhanced role of the private sector in the provision of telecom services; formulation of procedures for easy access to bandwidth; expansion of broad band connectivity; formulation of a comprehensive national plan for laying of optical fiber; and investment in R&D for introduction of new technologies with network solutions.
Information technology (IT) has assumed great importance in the knowledge-based economy. The government has accorded high priority to the IT sector. The main initiatives include the addition of facilities for computer education and training at affordable rates while ensuring quality of education, enhancement of internet infrastructure and the provision of efficient internet services at reasonable rates, establishment of software technology parks and data networks, incentives for software exports and computer hardware manufacturing, enhance arrangements for marketing of software overseas, and the provision of a legal cover to the electronic transactions enabling implementation of e-commerce.
The software industry in Pakistan has enormous potential to grow from its current size. The worldwide IT services market is growing at the rate of eight per cent in real terms and expected to reach about US 910 billion dollars by 2010. Of this, about 54 % will consist of hardware maintenance, IT management and other services. Software development is primarily a human resource dependent industry, and therefore there is a need to adopt measures to enhance the number and quality of professionals in this field. Strategies have been proposed under several focused areas including IT education, e-governance, and targeted IT human resource development.
A well-functioning financial system that efficiently channels funds that can be invested to most productive uses is essential for industrial development and growth. Recognizing the importance of financial reforms in the process of industrial development and economic growth, a series of measures have been adopted in recent years with a view to removing various distortions in the financial system, minimizing government’s interference in the banking system, and strengthening the prudential regulations. While these measures have led to an improvement in the financial system, much more needs to be done to transform the financial sector into an efficient and market-driven financial system.
Pakistan must continue the reform process with particular emphasis on: ensuring autonomy and competence of the regulators and promoting professional management at all levels of decision making in the financial institutions; implementing the privatization process efficiently and prudently so that 90 % of the banking assets are in the private hands; restructuring and strengthening non-banking finance companies to make them an integral part of financial services
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industries; further enhancing the institutional capacity of the State Bank of Pakistan (the central bank of Pakistan) and, Securities and Exchange Commission of Pakistan (SECP) in becoming effective regulators and supervisors of the financial system; automating the existing manual systems (banking operations); and developing local and wide area networks, connecting various departments and offices across the country.
The role of construction and housing sector in economic growth of a country is quite significant. The sector has important forward and backward linkages to a large number of industries. Housing is a major component of the construction sector, which responds to change in population, change in income, and availability of other profitable investment options. In Pakistan, there is a huge gap in the supply and demand for housing: currently there is a shortage of 5.5 million units. The report discusses the role of science & technology and research and development in quantitative and qualitative improvements in the construction and housing sector. The suggested action plan includes acquisition of technology for improving the quality of building materials, opening of a department of architecture at the higher level of education, establishment of a centre for standardization of construction materials, research and development on improvement and commercialization of high quality construction materials, and provision of other facilities and infrastructure. For the increased availability of affordable housing for the poor development of construction material like ferro cement for low cost and mass housing is recommended. This is a low cost technology and it is developed and used in other countries. Pakistan can import the technology and commercial production of the material can be useful for achieving the objective of Housing for All.
An efficient and good quality transport system contributes to economic growth by lowering domestic production cost through timely delivery of raw materials, facilitating market integration, and helping to strengthen competition. Major issues in the transport sector are: inadequate physical capacity; inadequate maintenance system; poorly targeted investment priorities; operational and financial inefficiencies of the public investment; and lack of private sector participation. The rational allocation of inland freight traffic between rail and road network, privatization of railway’s operation in selected sections and inclusion of private sector in development of roads, airlines, ports and shipping, and inland navigation can help in improvement of the efficiency of the sector.
For safe and efficient transportation network a number of measures are proposed including: modernization of the maintenance system; introduction of user charges; human resource development through training in transport management and maintenance standards; enhanced participation of the private sector in transport projects. The report recommends the revival of Karachi circular railway, and introduction of light rail transit system in Lahore as part of measures to improve urban transportation.
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National Science, Technology, and Innovation: Vision, Strategy and Action Plan
By
Prof. Dr. Atta-ur-Rahman N.I., H.I., S.I.,T.I.
Ph.D. (Cantab), Sc.D. (Cantab) Federal Minister (Chairman), Higher Education Commission
Coordinator General, COMSTECH President, Pakistan Academy of Sciences
INTRODUCTION Stunning advances made in the last few decades in the fields of information technology, biotechnology, material sciences, health sciences, renewable energy and other disciplines are rapidly changing the face of the globe, leading several countries on the path of social and economic development, leaving others behind. The pace of knowledge generation and its impact on new product and process development and emergence of new interdisciplinary areas, e.g. nanotechnology and post-genomic sciences are providing opportunities for nations not traditionally recognized with science leadership to leap frog many of the advanced G8 countries. Some of these new emerging areas have provided opportunities to nations which were not traditionally classified as scientifically and technologically advanced countries.
Information technology has transformed the world into a global village and is providing major opportunities for growth e.g. through e-commerce. Access to mobile phones and internet is opening up new opportunities for communications through wireless technologies in remote villages where no fixed phone lines exist. Business outsourcing from technologically advanced countries is paving the way to tap into the creative potential of our youth. The economies of certain countries such as Ireland, China and India have been transformed significantly with the help of ICT technologies. The ICT technologies differ from other technologies because they do not simply act as a source of revenue for business and government but accelerate the full process of development and innovation in many ways through improvement of communication and exchange of knowledge information. The intrinsic cross-cutting nature of ICT is resulting in improved productivity in industry and agriculture and it is creating huge new opportunities for businesses around the world.
Biotechnology has also emerged in recent years as a powerful medium for socio-economic development. A large number of biotechnologies are being developed which include recombinant vaccines, vaccines in drug delivery, molecular diagnostics, bioremediation, sequencing of genomes, bioinformatics development, genetically modified crops, recombinant therapeutic proteins etc. Multibillion dollar industries are being developed in many of these fields and countries such as Cuba, which are investing massively in such technologies, have begun to benefit in a major way.
New materials are having a major impact on a large number of industrial sectors including the electronics, automobile, engineering, polymer and plastic, textiles, construction and other sectors.
Recent advances in nanotechnology are leading to exciting new concepts for the development of new materials for the engineering, chemicals, pharmaceuticals and other sectors. Nanotechnology in health applications cover a wide variety of products involving the development of diagnostic tools, drugs and vaccine delivery, development of new type of surgical devices, treatment of various diseases, and detection of different pathogens. Nanotechnology can also impact access to pure water and affect sanitation through development of nanomembranes and nanoclays as well as through water recycling and remediation including the use of nanoporous polymers to purify
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water and remove toxic metals. Similarly application of nanotechnology in renewable energy through the development of sola r cells, hydrogen fuel cells and nanophotovaltaic devices as well as carbon nanotubes are rapidly developing.
Hydrogen fuel cell technology is predicted to be one of the most important energy production technologies in which hydrogen could be the source of clean energy starting from either water or methanol as a raw material. BMW has recently unveiled a prototype car which has a hydrogen powered internal combustion engine. Other companies are also working intensively in this area and it is expected that within a couple of decades, petrol may be largely replaced by hydrogen fuel cell technology.
New knowledge, particularly knowledge related to technology, drives the economic systems. Economic agents, including firms and governments, are forced to adapt to technical change in order to survive in a competitive environment. While governments should act as facilitator, technology capabilities must accumulate in enterprises. This will only be possible if we strengthen our universities and R&D organizations and create effective linkages between them and industry. It will be the increasing use of knowledge in the production processes and service industry which will determine the growth of our GDP. Our ability to compete or survive in the globalization of economic systems depends on our commitment towards the development of our human capital and ensuring a continuous learning process within the government institutions and enterprises to create a culture of innovation.
Innovation is concerned with enhancing national productivity and national competitive performance. Dynamic innovation systems involve an inter-play between a number of different parts of the society which include the government, private sector, universities and research institutions. The transition of our economy from an agriculture-based economy to a knowledge-based economy involves a mosaic of complex interactions in which a large number of players would be involved. The universities will need to play a central part in this transition through knowledge creation, its use and diffusion of new knowledge into the society through establishment of technology parks, business incubators, access to venture capital and other such schemes.
The new world order requires us to prepare our children to face the challenges of the global economy. This involves a substantially different type of education to be imparted, focused not only on the mastery of subject matters but also on the development of the various other skills such as the ability to think critically, innovate, communicate effectively, work effectively in teams, develop entrepreneurship and risk-taking skills, and the ability to face and manage changes in a flexible manner. This would require a massive focused national effort. While investment towards development of high level S&T manpower is necessary to meet the critical shortage of teachers and researchers, equally important is investment in skill development at technical education and management levels and provision of quality education to the majority of our population.
We need to develop and introduce a system of incentives that attracts our brightest youth towards scientific careers and a system which supports and rewards innovation. This would require investment in building an infrastructure for research and facilities and training institutes for continued training to deepen the knowledge and development of the skills of researchers. We need to strengthen or establish Centres of Excellence in those areas which are relevant to our social and economic requirements. These Centres should be equipped with facilities provided in the world’s best institutions including a top class faculty with internationally comparable pay scales. The scientists or researchers in these Centres of Excellence should be encouraged to work on contract research commissioned by the industry or be allowed a sabbatical for six months to work with industry. The Centres of Excellence should not only be a source of new knowledge but be equipped with state-of-the-art laboratories to provide Metrology, Testing and Standards services. The creation of National Standards, Metrology and Testing facilities are essential for economic development.
We need to create knowledge networks through collaboration of government research laboratories and industry at the regional, national and international levels. Regional knowledge
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networks can be developed through collaboration of industrial clusters with the local universities. Regional firms in turn must collaborate with each other to share knowledge about latest production practices and quality management. Collaboration between local firms, public institutions and multinationals are essential to transfer capabilities in jointly executed projects. Our industrial and trade policies must encourage local technology firms and engineering enterprises, through continuous upgrading of technology and skills and access to markets small industry must be encouraged to convert into medium sized ones and medium sized industry into large ones. Collaboration with the relevant international knowledge networks can help our industry enter global value chains.
The essential component of a National System of Innovation are the high quality knowledge workers or researchers. Pakistan presently has only about 120 scientists/engineers in per million population engaged in R&D as compared to 2500-3000 scientists/engineers per million population in the advanced countries. We should therefore target to reach a similar figure per million population (500,000 Ph.D. level scientists by 2025) if we are to participate in a knowledge economy.
The changing global face of science is leading to science becoming an increasingly multidisciplinary area in which institutions in many countries must participate together. Technology development is now closely interlinked with developments in various scientific fields, and we cannot expect to become technologically self-reliant unless we have the necessary strength in both basic and applied sciences. Basic science is what feeds the Science Parks where innovation and utilization is made. It has been shown time and again, that discoveries in the basic sciences of today become the basis of major commercial products of tomorrow. Pursuit of new knowledge and its application for invention should become a part of the social fabric. In a competitive world of knowledge-based economies, keeping abreast with the latest technology is not sufficient but direct engagement in science, technology, innovation and discovery is essential.
For this an “out-of-the-box” thinking and bold decision making would be required. An example of how such decisions can have a major impact on the national economy is as follows: When I was the Federal Minister responsible for Science & Technology (including Information Technology) in the previous government, I had examined in some depth the reasons why mobile telephony had not grown in Pakistan for the previous eight years that it had been in existence. It turned out that the reason was simple and obvious but had never been addressed previously. Anyone who had a mobile phone had to pay for receiving a call! There was therefore a general reluctance in the public to subscribe to mobile telephones as subscribers had to pay for calls which are made by others to them. I decided to change this and bring in the “Calling Party Pays” (CPP) regime. This one step made a sea change in the growth of the telecommunication sector in Pakistan. By the time when I had left as the Federal Minister responsible for Information Technology in October 2003, there had been a several hundred percent growth in mobile telephony in Pakistan with the number of mobile telephones expanding exponentially. This growth continues unabated and it has become the single most important sector of our economy today, highlighting how critical decisions in key areas can impact entire economies.
Another important decision which I took was to explore the field of renewable energy for providing electricity power to the country. The project was accordingly initiated by the Ministry of Science and Technology under my direction to collect nationwide wind data. The project was executed by the Pakistan Meteorological Department and the data was collected over the two years period. As a result a site has been identified near Gharo, Sindh which has potential of producing 10,000 MW of electricity in the area which is 60 kilometer wide (Gharo – Keti Bander) and 180 kilometer long (from coastal area uptil Hyderabad). The pre-feasibility of the site at Gharo has been carried out and it has been verified by national and international companies such as General Electric, Vestas etc. These companies are willing to invest US$800 million to
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produce 583 MW of electricity from the wind energy during the next 2-3 years without any financial liability on the part of the government. In the short term 880MW of electricity can be produced by the year 2010 from the wind energy and supplied to the national grids. This can be magnified to 3000 MW of electricity by the year 2020.
The price on which the electricity will be supplied will be initially 6 cents per kilowatt hour and it will later be dropped to 3-4 cents per kilowatt hour after few years. The potential for the production of electricity through wind energy is therefore greater than the production of electricity through large dams that the government is planning to build and it can be done without any financial involvement of the government.
The area of renewable energy is therefore another important priority field which can be exploited not only using wind energy but also solar, hydroelectric, biomass, hydrogen fuel cells and other vas emerging technologies for national development.
Presently none of the universities in Pakistan are ranked among the top 500 universities in the world. The neglect of the higher education sector in the past 50 years has resulted in a system where the graduates lack basic communication skills, ability of critical thinking and analyzing information to cope with the diverse requirements of the challenges posed by a knowledge economy. We are striving to include at least 2-3 of our universities in the bracket of the top 500 in the next ten years. Sustainable economic development in the highly competitive world market requires a major effort in the generation of knowledge, innovation and invention. The cycles of poverty and dependence will only be broken by major investments in national higher education programmes and committing to reach an allocation of 1% of GDP for higher education sector. Pakistan has neglected its higher education, science and technology sectors for over 50 years and major commitment to redress the decaying infrastructure is required.*
The growing inequality in our society is a threat to our social, political and economic stability. At the same time it is a fact that this inequality stems from our neglect in the development of education and science and technology sector. Knowledge economy cannot thrive or survive in a social climate where a large section of the population in fact is excluded from the benefits of economic growth. We need to recognize that policies concerned with human capital development, science & technology and innovation should lead to a raise in GDP per capita, employment generation and poverty alleviation. Consequently they need appropriate and sustained investments, they take time to work and they will not be helped by frequent changes in objectives or national commitments.
* In a recent study (Nature, 15 July 2004, pages 311-316), a direct relationship has been shown between the quality of science output of a nation and the health of its economy. The countries occupying the top eight places in the science citation rank order (USA, UK, Germany, Japan, France, Canada, Italy, Switzerland) produced about 84% of the top 1% most cited publications between 1993 and 2001. PPP GNI is gross national income converted to international dollars using purchasing power parity rates. An international dollar has the same purchasing power over GNI as a U.S. dollar has in the United States.
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I. VISION, POLICY GUIDELINES AND OBJECTIVES OF THE PROGRAMMES
Recognizing the key role that science and technology now play in socio-economic development, I propose the following objectives and policy guidelines for Pakistan’s scientific and technological capability building:
• To use science and technology as a vehicle for alleviation of poverty, elimination of hunger and malnutrition, provision of clean air and drinking water, enhancing livelihood security, reducing regional imbalances, creating opportunities for employment and for creating an environment in which our people can live with dignity.
• To ensure the impregnation of science in our society so that the science culture permeates into every sphere of our national activity, and contributes to the development of a progressive and enlightened society in which science is the corner-stone of all national sectoral policies.
• The higher education and S&T policy be targeted towards creating an innovation culture. It will be through our indulgence in innovation that will determine our comparative strength and ability to compete in the world markets. Innovation is not just creation of new products but also relates to changes in value addition and productivity increase brought about through skill development and technology, efficient management of production and services and their marketing.
• To promote scientific research in academic and research institutions in the country, thereby creating a research environment which attracts the brightest of our youth to take up careers in science and technology. For this purpose Higher Education Centres and Institutes should be established and maintained as world class Centres of Excellence in key disciplines so that they can contribute to the development of cutting edge science and technology in the country and where the youth of the nation can feel the excitement of extending the current frontiers of science to new horizons.
• To ensure that academic and research institutions work in an atmosphere free of bureaucratic hurdles and complete autonomy so as to foster creativity and promote the science and technology enterprise in the country.
• To support the technology upgrading of Small and Medium size firms through easy access of technology, its adaptation and absorption through reverse engineering.
• To provide incentives to Firms (tax incentives, low interest loans, others) for setting up of in house R&D centres and for continuous training of their workers.
• To promote collaborative research between public R&D organizations /universities and private firms through supporting joint technology related projects and by encouraging mobility of scientists from universities/R&D organizations to promote private companies.
• To give special emphasis on the transformation of science and technology research output to new products and processes through access to Venture Capital and Technology Development Fund
• To establish public libraries, science parks, technology incubation centres and science museums for promotion of science culture and diffusion of technology.
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• To establish policy research institutes staffed with scientists and economists entrusted to carry out research on several aspects of policies related to technological capability building. This institute should regularly carry out Foresight studies identifying niche areas for development.
• To use post-genome technology to ensure food security on a sustainable basis. Simple technological solutions for harvesting, storage and transport exist and should be implemented.
• To strengthen basic sciences and establish linkages with applied sciences such as agricultural sciences, engineering sciences, material sciences, information technology, biotechnology, pharmaceuticals and space sciences.
• To strengthen the Intellectual Property Rights regime in order to foster creativity and protect the rights of inventors.
• To promote efforts to provide speedy access to all kinds of information at affordable costs utilizing electronic communication wherever possible.
• To promote science and technology cooperation between institutions in Pakistan with leading international institutions in order to develop a strong network of international linkages which can help in transfer of knowledge.
• To encourage research in engineering, electronics, communication technologies, agriculture sciences, biotechnology, energy, chemicals and pharmaceuticals and new materials.
• To encourage research in livestock farming and dairy development so that animal proteins can be made available to a large segment of our population. Accessibility of animal proteins to our children is vital for their normal growth and development and prevention of protein-energy malnutrition which is quite prevalent in this country.
• To encourage research in the field of natural disasters, particularly drought and its related fields including promotion of biosaline agriculture, desertification, reclamation of saline soils, water management and optimum use of water resources.
• To support multidisciplinary research so that new scientific knowledge can be closely inter-linked between various disciplines and translated into economic benefits.
• To encourage the spirit of scientific enquiry in all areas including social aspects and to promote the development of bioethics so that new problems being constantly thrown up by advances in science can be properly addressed without harming ethical and religious values.
• To strengthen Science Advisory mechanisms by strengthening the organizations such as Engineering Council, National Science Council, the Pakistan Academy of Sciences and other professional societies who can be engaged for reliable counsel.
• To take all other necessary steps to transform Pakistan into a major world-class player in order to harness the power of science and technology for socio-economic development and national security by providing the requisite financial support compatible with international norms.
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II. STRATEGY AND IMPLEMENTATION PLAN
In order to implement the objectives outlined earlier, specific sectoral projects and programs will need to be identified with well defined time lines, budgetary resources and deliverables. These are presented in the letter sections of this book. However some generic strategies and requirements are given bellow:
1) Governance
(i) The set-up of government organizations concerned with Higher Education/Science and Technology needs to be substantially strengthened so that they are transformed into action-oriented bodies of highly competent and talented scientists and engineers tasked to achieve a set of specific objectives.
(ii) Think Tanks should be set up in various sectors such as agriculture, engineering, biotechnology, information technology, pharmaceuticals, basic sciences, renewable energy, materials sciences, post-genome sciences, nanotechnology, space sciences, water resources, desertification etc. Each team of professionals should work closely with the relevant ministries in order to achieve well defined targets. Science and Technology should become a centre piece for policies of all of the relevant ministries.
(iii) The programs should include an external critical peer review mechanism for the performance of each ministry and appropriate remedial measures taken where performance is unsatisfactory
(iv) Each Ministry in the Government should set aside a certain part of its overall budget towards promotion of science and technology programs and indigenous technology development. Such activities should be undertaken in close coordination with the Ministry of Science and Technology and the Higher Education Commission.
2) Human Resource Development
(i) Universities and Research Centers need to be strengthened by the induction of high quality Ph.D. level faculty (300-400 Ph.D. level faculty members in each university and 50-100 Ph.D. level researchers in each research institute) in order to provide the quality manpower needed for development of our educational institutions, services and production industry.
(ii) The advanced countries have 2500-3000 scientists/engineers per million population and they form the backbone of their development process. Pakistan only has about 120 scientists and engineers per million population and needs to develop at least 500,000 high quality scientists/engineers over the next ten years in carefully selected fields. Massive postgraduate level training programmes need to be launched by the Higher Education Commission for the purpose. The trained manpower should be provided with infra-structure, facilities, research funding and a high salary structure so that the scientists and engineers can be usefully employed in the national development process. Organizations under the Higher Education Commission as well as those under the Ministry of Science and Technology and other relevant Ministries need to work closely together to identify the areas of national importance and to arrange the requisite postgraduate training programs.
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(iii) We need to train and retain high quality S&T manpower by offering attractive salary structure and a conducive environment for research. For this contractual system of appointments with an appropriate salary structure to attract the best of our human resource into the scientific profession should be introduced in higher education and S&T institutions in the country, subject to regular performance assessment.
(iv) The Government should initiate an ambitious programme to ensure that it enthuses the indigenous science and technology community as well as offers incentives to our top class scientists from technologically advanced countries to return to Pakistan. The reversal of brain drain should be a high priority for any country wishing to develop its economy.
3) Science Education in Schools, Colleges and Universities
(i) There is a serious mismatch between the capabilities of school graduates and the need for highly advanced skills by the industry. Vocational training institutes of world standard should be established by the upgradation of existing institutions and by providing top class faculty and appropriate laboratories. Private sector must be consulted for regular update of curricula. All technical college graduates must receive about 6 months training in the relevant industry. There is also a need for promoting a culture of continuous and life-long learning so that the skills can be constantly improved and upgraded.
(ii) A special program for improving science education in secondary and higher secondary schools should be introduced so that students can learn physics, mathematics, biology, chemistry, computer science etc. This would involve not only improving the curricula but also ensuring access to quality teachers and teaching tools. All science students in high school and secondary schools should study mathematics, physics, chemistry and biology whereas students in other subjects should also be required to study mathematics along with one other science subject. We must invest in establishing science laboratories at all over our urban and rural schools. Our students must be exposed to the excitement of learning by doing.
(iii) The shortage of science teachers can be addressed by introducing a system of contract appointments for unemployed graduates. The minimum qualifications for school teachers must be B.Sc./B.A. and not matric. We need to train a core of good science and maths teachers and should consider introducing “merit pay” or other incentives to reward and retain them in this vital profession.
(iv) In order to introduce quality and accountability in our education system we must benchmark all our educational institutes. A regular audit in terms of quality of students produced by schools/colleges judged by an internationally known criteria can introduce competition and quality in our education system.
(v) The 2-year B.S. program in colleges should be systematically replaced with the 4-years B.S. program and all current undergraduate programs in the universities should be changed from 2-year to a 4-year curriculum. Universities not having undergraduate programs should introduce these on a priority basis.
(vi) Some of the existing colleges should be converted from just those offering B.A./B.Sc. degrees to “Community Technical Colleges” which produce skilled manpower in areas such as electronics, mechanics, medical technology, refrigeration, plumbing, design, computer programming and production technologies.
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(vii) Linkages should be established with suitable international agencies (such as UNESCO, Inter Academy Panel, National Academy of Sciences, USA etc.) in order to improve the quality of school level science education.
(viii) Science and technology education must also be coupled with the study of social sciences so that acquisition of expertise in science and technology is strongly connected with ethical values and considerations.
(ix) To ensure that academic and research institutions aim to achieve 'world-standards', and carry out international quality research, academic audits should be implemented and the outcome should be matched by funding. Such assessments are now commonplace in all scientifically leading nations.
(x) The universities should maintain properly equipped workshops with highly qualified personnel for repair and maintenance of costly equipments in science departments. (+)
(xi) National Libraries (including digital libraries) should be established for higher education science and technology which can provide access to all the important international journals of science, engineering and technology.
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4) Leadership in Management
It is important to develop leadership and management skills which are acutely lacking in Pakistan so that science and technology institutions can be headed by persons who are not only eminent scientists but also possess the necessary leadership and management skills to strengthen such institutions. Sustained economic development is based on strong institutions.
5) Priority Areas
The following areas need to be given high priority so as to have the necessary impact of the S&T efforts:
(a) Basic sciences (physics, mathematics, chemistry, biology)
Selected departments in each university should be substantially strengthened through induction of highly qualified human resources and necessary facilities and research funding provided so that they can work in an environment conducive to creation of new knowledge.
(b) Applied Sciences
Certain national priority areas in Applied Sciences should be promoted including Engineering Sciences, Information Technology, Agricultural Sciences, Biotechnology, Material Sciences (including nanotechnology) Chemicals and Pharmaceuticals, Energy, Water, Space Sciences etc. Investments in these fields should be focused with clear targets. Major research and development funding should be made available for projects of national significance to achieve the set objectives in different fields.
(c) Establishment of Mechanisms for Linking the R&D effort to Socio-economic development
(+) In the recent ranking of top 500 universities, none of the institutions of Pakistan emerge, while 3 from India (Indian Institute of Science at position 258, Indian Institute of Technology, Delhi at position 457, Indian Institute of Technology, Kharagpur at position 458) and 2 from Turkey (Hacettepe University 453, Istanbul University 488) to make it to this distinguished list. In a 10-year framework, Pakistan should aim to get at least 4 institutions in this prestigious list.
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Mechanisms should be introduced to link R&D efforts to industry, agriculture, services and defense sectors (incentive schemes, tax holidays, technology parks, access to venture capital etc.). Duty free import of machinery and capital equipment should be allowed for R&D activities.
(d) Quality Assurance
We need to create awareness about “Quality” in all our institutions, particularly the educational educations and the production sector. Our socio-economic development in the knowledge economy will depend on the quality of our human resource and export oriented products and commodities.
6) Science, Innovation and Invention
(i) Special emphasis should be given on the translation of new knowledge into new technological products ensuring the development of small, medium and large-sized industries in the country. Mechanisms should be introduced so that the benefits of technological growth reach the vast masses with the aim of impacting and improving the quality of life of every citizen of the country. In this context, Science Parks should be developed with interdisciplinary ethos where the best of scientists and technologists from all disciplines are attracted. (*) &.
(ii) “Technology foresight” exercises should be regularly carried out to assess the
present and future needs of technology, the niche opportunities for Pakistan and the projected impact of such technologies on social, economic, health and environmental aspects. Efforts are needed to promote R&D and technological innovation, to introduce technologies through strategic incentivisation and to diffuse technologies to the production sectors for which effective mechanisms will need to be developed and implemented.
(iii) The Higher Education, Science and Technology programmes should be developed with local requirements in mind so that socio-economic benefits for the society can be achieved quickly and consequently a commitment from the society can ensure a sustainable investment in science, innovation and discovery.
(iv) It is important to develop appropriate steps to encourage innovation and entrepreneurship. This would involve a close cooperation between government departments, universities, Ministry of Science & Technology, Higher Education Commission and the private sector.
While it is important to encourage basic research and new product and process development, in the short and medium term high priority should be given to acquire foreign technology and to initiate programmes of reverse engineering in order to understand and absorb such technologies, leading thereafter to adaptive research as well as domestic research and development in basic sciences.
7) Establishment and Strengthening of Centres of Excellence
We need to develop a competitive edge in the changing global scenario. World-class Centres of Excellence should therefore be created in selected priority fields so that Pakistan becomes internationa lly competitive and in some cases leading in a 10 year framework. These Centres should be tasked to nurture high quality talent in various fields of science and engineering and to establish linkages with industry, agriculture and health and to tackle major national problems. Centres of Excellence should also be established in technology development and technology commercialization.
(*) These Science Parks could have a major accelerator such as a synchrotron light facility, a highly advanced multi-disciplinary scientific tool, as its centre piece; something which many of the emerging economies have established recently including Singapore, Thailand, Korea, China, India and Brazil. In Thailand and Korea, the synchrotron light centre has been created next to Science and Technology Park. In Australia, similar effort is being made.
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8) Promotion of Inter-Disciplinary Research
Knowledge economy requires highly qualified manpower trained in multidisciplinary skills. Our technical colleges and university training programmes should encourage multidisciplinary learning. A mechanism should be introduced allowing scientists to switch fields in order to promote inter-disciplinary learning and research. This may require modification in the academic and governance structure of universities and colleges. The reform should include promotion of interaction of the physical, biological and earth scientists with academics in humanities and social sciences.
9) Promotion of Commercial Research
There is need to develop a corporate culture for scientific institutions so that their output can be utilized. R&D institutions should therefore set up strong commercial units which can develop effective liaison with industry. These units should be properly funded, be managed by suitable senior level marketing personnel and be given appropriate funding so that they can invest in areas of importance for commercialization and strong marketing initiatives undertaken by the institutions.
(a) Programs should be introduced to ensure mobility of scientists and engineers between universities, research institutions and industry. Joint programs between academia and industry should be facilitated through a funding scheme under which research projects jointly submitted by universities and industries are funded.
(b) R&D institutes should be given the privilege to patent their output and should also have the right to charge fees for licensing technology to industrial firms and units.
(c) Property rights, especially intellectual property rights on information development, such as software development, must be enforced and legally protected so that the work of scientists and engineers gives them the legal ownership of the new discoveries.
(d) One of the major obstacles for utilization of research results is the absence of process engineering companies in Pakistan which can take the design data of pilot/demonstration levels and provide total turn-key technology to the industrial sector. Such institutions need to be developed urgently.
(e) Persons working in academic and research institutions should be encouraged to act as Consultants to industry with additional emoluments, and to share the financial benefits from any patents that are granted for their work so that there is an incentive to work on industry-related applications of research.
(f) The industry of Pakistan must be encouraged to sponsor contract research at the R&D institutes, primarily in those cases which have commercial viability and value. South Korea and Japan as also most developed countries have successfully employed this strategy and 50-70% of its R&D costs are met by the industry. India and other developing countries have also taken up this initiative.
(g) Mechanisms should be introduced to offer incentives to the private sector to encourage research and development efforts at the industry through access to venture capital, tax incentives, and government sharing of costs for such research. Banks and other financial institutions should be directed to provide soft loans for establishing R&D units on less than the prevailing mark up/commercial rates. The government in turn should make it mandatory for the private sector to spend a certain percentage of their profit on R&D activitie s according to the needs of the country and in areas where R&D can lead to the development of import substitute products and help enhance exports.
10) Science and Technology Trust Fund
A Science and Technology Trust Fund can be created by applying a cess (Pooling Tax) to all private sector economic activities. The Trust Fund should be operated by the
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Technology Cluster Council comprising four members nominated by chambers of Commerce, two eminent scientists and two government officials one each from Ministry of Industry and Ministry of Science and Technology. By establishing transparent procedures the Fund can focus on activities related to skill development and funding joint projects in public, private partnership. Public/private partnerships are critical if science and technology are to benefit society.
11) Scientific and Technological Services
It is important to initiate a major national programme in the area of scientific and technological services including survey work related to scientific statistics and standards in order to ensure the optimization of the innovation process.
12) Promotion of Indigenous Knowledge
Measures should be taken to protect and make use of indigenous knowledge for national development including areas involving biodiversity, protection of genetic resources and use of traditional knowledge and skills and their applications in medicine and other fields.
Development of indigenous technology and indigenous products should also be encouraged, including engineering and fabrication of local machineries required in various industries.
13) Women in Science & Technology
To encourage women to adopt careers in science and technology, special programs should be introduced to identify the brightest women committed to research in S&T, and steps taken to promote their careers through the provision of grants/scholarships etc.
There is a need to provide wider access to science and technology education and employment opportunities for girls and women in order to maintain gender equality. The existing gender disparity has resulted in depriving the nation from help of its intellectual productive potential.
14) Legal Infra-Structure
The legal infra-structure needs to be put in place in order to ensure acquisition of new technologies, their adoption, absorption and propagation. A national technology transfer policy needs to be formulated in consultation with all ministries. This should guarantee that a technology transfer process is built-in in respect of all major national projects so that development of technological competence and indigenous self-reliance is made compulsory in every national project. Technology transfer should be regulated appropriately to ensure that licensing agreement accompany a certain percentage of skill and knowledge transfer. For example involvement of local engineers during assembly of plants/machinery, purchasing of blue prints and technical training of personnel to work on similar plants overseas.(*) 2
15) Promotion of High Technology
The proportion of hitech products is increasing in world trade. Pakistan share of total exports in hitech products is insignificant. We have achieved competence in several state -of-the-art technologies including aerodynamics, thermal imaging, precision manufacturing, computational fluid dynamics, electric magnetic compatability design and testing, encryption etc. The scientists working at the defense organizations have made
(*)Both Malaysia and South Korea used technology policies to encourage FDI for joint venture in export industries.
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breakthroughs in several cutting edge technologies, such as growing laser crystals, design and manufacture of precision optical parts for giant CMS projects at CERN, design and testing of ASIs, manufacture of laser land leveling devices etc. These technologies need to be commercialized through public/private partnership.
The national defence organizations are a repository of considerable skills in instrumentation, control and advanced material handling. Extending or converting these skills to civil use could broaden our industrial skill base considerably and would help us develop hitech industries.
16) Quality Assurance
Quality assurance is a vital aspect for industrial growth has remained largely neglected. Rigid quality standards for testing and accreditation need to be established for each industrial sector in order to meet the challenges imposed by WTO. The WTO requirements but this area including the imposition of non-tariff barriers to trade, on growth of our industries can be very negative unless we have adequate research laboratories whose certifications are internationally accepted. An internationally recognized accreditation system should be incorporated in all major laboratories in the country so that exports of our products can be certified to meet the minimum quality criteria laid down by international buyers. High level national “Standards” institutions should be established to provide assistance to industry and other national organizations. Scientific centres of international standards should be developed in major industrial cities like Karachi, Lahore, Faisalabad, Quetta with suitably trained personnel and equipment so that they can meet the quality certification demands of WTO/private sector industries. The universities and R&D organizations should also prepare their laboratories for certification of international level to meet the analytical demands of testing and standardization.
17) Public Awareness of Science and Technology
(i) It is important to ensure that the central role of science and technology in national development is realized by the society, and awareness of its importance permeates into every sphere of our activity. For this a number of programs need to be undertaken which should include the use of mass media (TV, radio, newspapers etc.) highlighting science and technology in an interesting and attractive way. Nation's leaders including MNAs should become the spokespersons for communicating the message of 'the importance of science and technology in combating poverty'. In this connection, the impact of science and technology on our lives and the effects that it is having on social, ethical, moral, legal and economic aspects need to be emphasized.
(ii) Recent developments of biotechnology have opened up moral, legal and health issues (such as the use of GM crops in terms of safety). These issues and their proposed solutions need to be widely understood.
(iii) The importance of science and technology and the excitement that it provides to researchers needs to be widely disseminated among students through establishment of science museums, planetaria, botanical gardens as well as through interesting television documentaries.
(iv) There need to develop strong linkages between science and technology with social sciences and humanities so that science and technology do not work in isolation of the society as a whole.
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18) International Linkages
It is important that close linkages between science and technology institutions in Pakistan be established with world-class institutions in technologically advanced countries through exchange of personnel and promotion of joint research programs between institutions so that the quality of the scientific effort in Pakistan can be improved. International alliances and linkages between science and technology institutions in Pakistan with international institutions can be encouraged by funding programs and projects allowing exchange of scientists between Pakistan and technologically advanced countries. Specific initiatives should be undertaken under which institutions, universities and research centres in Pakistan can be twinned with world quality research centres abroad in order to promote the science and technology endeavour.
19) Monitoring Implementation
In order to ensure the successful implementation of the plan it will be necessary to continuously monitor and assess the implementation of the plan through indicators of the performance. These should include the level of enhancements of the country’s national S&T statistical indicators. The collection and dissemination of S&T statistics shall be made regularly, systematically and efficiently so that the monitoring of recent trends and comparison trends of other countries can be clearly judged. The S&T policy can then be monitored through the evaluation of S&T programs in terms of, (a) number of publications of Pakistani scientists and engineers included in the Science Citation Index, (b) number of scientists and engineers produced and employed, (c) number of Pakistani Ph.Ds. in science produced and employed, (d) number of internationally accredited laboratories, (e) technology balance of payments, (f) investments in high technology areas, (g) contribution of technology based industries to the GDP as a percentage of the total contribution of industrial growth, (h) others.
20) Continuous External Assessment
A continuous process of self-assessment as well as external assessment should be introduced to ensure that the goals and targets are met and the plans are being properly executed according to a pre-determined time-frame for each activity. Methods should be introduced so that external peer review could be carried out regularly of various science institutions.
Standardized national training programs should be implemented in selected fields such as computer science to ensure that persons who are coming in such fields are properly qualified.
National Committees of experts, not exceeding three/four members, should be constituted in each discipline to regulate the implementation of the policies, and monitor the development and progress of R&D activities of both the public institutions and private sectors/industries.
21) Strengthening of Pakistan Academy of Sciences
Pakistan Academy of Sciences needs to be substantially strengthened and transformed into an academy of international stature. It's mission should be to promote national research policy and should act as a catalyst of initiating the establishment of a number of high quality science and technology institutions. This could also take the role of a science funding body or could have a separate arm which deals with research fundings in a manner similar to Research Councils in the UK or National Science Foundation and National Institute of Health in the United States. Alternatively, the Pakistan Academy of Sciences could be modelled on the pattern of the Chinese Academy of Sciences. The
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Pakistan Academy of Sciences may take the lead in collaboration with PCSIR, PCRET, NPSL and PSF to start programs through reverse engineering for manufacturing of household appliances, basic scientific instrumentations and other useful items.
III. BUDGET
The Government should make an annual increase of 0.2% of its GNP each year towards science and technology till it reaches 3% of GNP over the next 10 year period. This increase in annual allocation should become a mandatory part of the budget and should be considered an essential component for national development and defence. A similar increase of 0.2% of GNP should be made annually for the Higher Education sector till it reaches 1.0% of GNP over the next 4 years and reaches 2.5% in 10 years.
National Science Fund: A major National Science Fund should be set up (at least 0.5% of GNP) so that Science and Technological Parks can be created with the remit of engagement in leading edge and its translation into products with direct socio-economic benefit to the country in priorities national areas.
IV. CONCLUSION
The challenge for Pakistan is to develop a competitive edge at the global level for sustainable development. This will be determined by the ability of our nation to create, acquire and use knowledge for socio-economic development. The Science & Technology and Higher Education sectors have to play a critically important role in the transition towards a “Knowledge-Economy“. It is only if we are armed with the right knowledge and skills that we can improve our living standards and provide a decent future to our children.
The technology vision provides a comprehensive plan of action for social and economic development and needs to be considered as an investment priority for the well being of our nation. I have full confidence in the ability of our scientists, industrialists, young students and other stakeholders to convert this vision into a development reality.
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Total PSDP Financial Allocation (Rs. in Millions)
Period Total S&T HRD/ Skill
2005-06 23688 14238 9450
2006-07 31009 16834 14175
2007-08 40783 19520 21263
2008-09 54279 22385 31894
2009-10 73340 25500 47841
Total 223099 98477 124622
2010-11 89040 28009 61031
2011-12 96482 30568 65913
2012-13 104074 32887 71187
2013-14 112388 35506 76882
2014-15 121361 38332 83028
Total 523344 165304 358041
2015-16 130977 41302 89675
2016-17 141300 44452 96849
2017-18 152762 48165 104597
2018-19 165037 52073 112964
2019-20 176776 56035 120742 Total 766852 242026 524826
Note: The figures for 2005-06 to 2009-10 may not exactly be equal to the total cost of the projects because of throw forward.
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CHAPTER 1
INTRODUCTION
A. R. Kemal
Various structural problems in the economic structure of Pakistan have adversely affected the performance of Pakistan’s economy. The growth rate of output and exports has slowed down; low levels of investment have resulted in obsolescence and thus eroding the competitive edge; and productivity levels are low in almost all the production sectors. The low levels of human resource development and R&D facilities, and the inadequate and poor infrastructure have been the major factors responsible for poor quality and higher cost of Pakistani products.
Import substitution industrialization strategy has been quite costly; a large number of manufacturing industries are quite inefficient, and neglect of agriculture sector has resulted in lower than the potential growth of GDP. Industrial and trade policy distortions, narrow industrial base, low investment levels, poor human resource development, inadequate infrastructure, frequent changes in economic policies, low productivity, and poor quality of products, inefficient public sector enterprises, and inadequate regulatory framework are factors marred the performance of the industrial sector.
Agriculture sector has suffered in the past from heavy implicit taxation, and at present agricultural inputs are subject to sales taxes. Productivity level has been stagnant in most of the crops, livestock, fishery, and forestry sectors. The development of bio-technology, use of appropriate machines, agricultural research and development, extension services, multiplication of seeds, water availability and a focus on the minor and non-crops sectors are vital for the future growth of the agriculture sector. An increase in efficiency levels in services will help in improving the productivity of other sectors of the economy including agriculture and industry.
While Pakistan may emulate the policies pursued by the fast growing economies of the Far-East, it has to grow in a drastically changed production and economic environment. Firstly, the demand pattern has changed towards sophisticated consumer products and even for the traditional products preferences are for standardized and quality products. Secondly, the nature of technological innovation and consumer demand has created an environment for new products whose lifecycles are relatively shorter than before; producers who remain competitive through heightened applications, innovation and quick responses to consumer demands, will be able to survive. Third, the intra-industry trade especially of the components and parts has increased sharply over time. Fourth, with the advent of WTO governing methods, legislations, and trading relationships are to influence the manufacturing structures of each country. Fifth, with the successful emergence of EU, countries around the world are reaching across the borders to develop competitive advantage by leveraging the differences in wage rates, technology development and industrial capabilities. Pakistan will have to make a concerted effort to draw maximum benefits from SAARC and ECO. Sixth, an increasingly wider array of occupational skills is required to compete effectively.
In order to respond effectively to these challenges, it is necessary to create an enabling environment that takes into account the key parameters which are imperative for the businesses in Pakistan to compete effectively in the global market. These parameters include development of science and technology, human resource development, and the infrastructures.
46
Various structural problems in the economic structure of Pakistan have adversely affected the performance of Pakistan’s economy. The growth rate of output and exports has slowed down3; low levels of investment have resulted in obsolescence and thus eroding the competitive edge; and productivity levels are low in almost all the production sectors. In particular, manufacturing industries of Pakistan show high degree of concentration4 and continued high levels of protection have resulted in allocative, technical and X-inefficiencies. The low levels of human resource development and R&D facilities, and the inadequate and poor infrastructure have been the major factors responsible for poor quality and higher cost of Pakistani products. For a higher and sustained long run growth of GDP, not only the economy needs to be restructured in accordance with the long run vision, the human resources, science and technological infrastructure and R&D activities will also have to be significantly strengthened.
We may broadly classify the economy into three sectors, viz. agriculture, industry and services. Main focus of attention of the government policies in the past has been on the industrial sector, particularly the manufacturing sector. With a view to promoting the manufacturing sector it pursued the import substitution industrialization strategy and imposed tariffs and non-tariff barriers on competing imports. These policies have been quite costly; a large number of manufacturing industries are quite inefficient, and neglect of agriculture sector has resulted in lower than the potential growth of GDP.
Whereas in the past, the agriculture sector suffered from heavy implicit taxation, the removal of restrictions and duties on the exports of agricultural products ensure that the farmers receive the world market prices. While agriculture is subsidized by the developed world, agriculture in Pakistan suffers from negative protection as the agricultural inputs are subject to sales taxes. The output per hectare in almost all the agricultural sub-sectors is far below the average world level due to a number of factors. Since R&D activities in the sector has been just marginal and that too devoted to just a few major crops, it has resulted in almost stagnant productivity levels of minor crops, livestock, fishery, and forestry sectors. While productivity levels have improved in some of the major crops, per hectare yields are still way below the levels achieved elsewhere. Agriculture has also suffered from poor marketing, non-availability of certified seeds and slow development of high-yielding and pest resistant varieties, poor extension services, unbalanced use of fertilizers and injudicious use of pesticides, poor use of limited water resources, inadequate tillage, poor storage facilities and lack of development of the agro-processing industries. The development of bio-technology, use of appropriate machines, agricultural research and development, extension services, multiplication of seeds, water availability and a focus on the minor and non-crops sectors are vital for the future growth of the agriculture sector.
The performance of the industrial sector in Pakistan has been marred by a number of factors including industrial and trade policy distortions, narrow industrial base, low investment levels, poor human resource development, inadequate infrastructure, frequent changes in economic policies, low productivity, and poor quality of products, inefficient public sector
3 Though the GDP has grown at a rate of 5 percent during the 1950-2003 period it fell to just 4 percent in the 1990s though the growth rate has accelerated in recent years. 4 The food industries accounted for 13.8 and textiles industries for 24.0 percent of the total manufacturing value added. On the other hand industries electrical and non-electrical machineries accounted for 4.4 percent and the automobile industries for 4.7 percent of value added. Similarly, even though chemical industries accounted for around 15.2 percent of manufacturing value added, the chemical industrial output is concentrated in low-tech and low high value added industries.
47
enterprises, and inadequate regulatory framework. These problems can be resolved through an appropriate industrial, human resource development and science and technology policies. The incentive structure needs to be modified to ensure diversification of industrial structure towards high tech industries such as chemicals, engineering and electronic industries.
The services sector plays an important role in the productivity of agriculture and industrial sector. Moreover, like many other countries Pakistan may have to open the services sector to the world in the second round of WTO. Pakistan would face enormous problems unless the efficiency levels of the service industry improve. An increase in efficiency levels will also help in improving the productivity of other sectors of the economy including agriculture and industry. It needs to be underscored that the services sector is skill intensive and an efficient export-oriented services sector would require a large number of quality professionals and skilled workers and big service provider export houses.
While Pakistan may emulate the policies pursued by the fast growing economies of the Far-East, it has to grow in a drastically changed production and economic environment. Firstly, the demand pattern has changed towards sophisticated consumer products and even for the traditional products preferences are for standardized and quality products. Secondly, the nature of technological innovation and consumer demand has created an environment for new products whose lifecycles are relatively shorter than before. Therefore, only those producers who remain competitive through heightened applications, innovation and quick responses to consumer demands, will be able to survive. While high levels of investment and its optimal utilization would create demand for new investment, science and technological development are essential for development of new products, improvement in quality of products and reduction in production costs. Third, the vertically organized industrial patterns of the past are being replaced by network arrangements among firms within and outside the country. The intra-industry trade especially of the components and parts has increased sharply over time. Fourth, with the advent of World Trade Organization the production structures are influenced by the various agreements and the countries have become interdependent. The governing methods, legislations, and trading relationships are to influence the manufacturing structures of each country. In particular with the strict implementation of intellectual property right, reverse engineering would not be that easy to pursue. Fifth, with the successful emergence of EU, countries around the world are reaching across the borders to develop competitive advantage by leveraging the differences in wage rates, technology development and industrial capabilities. Pakistan will have to make a concerted effort to draw maximum benefits from SAARC and ECO, the two organizations where Pakistan is represented. Sixth, an increasingly wider array of occupational skills is required to compete effectively. Information technology and logistics have become part of the basic infrastructural framework for industrial development.
In order to respond effectively to these challenges, it is necessary to create an enabling environment that takes into account the key parameters which are imperative for the businesses in Pakistan to compete effectively in the global market. These parameters include development of science and technology, human resource development, and the infrastructures.
The various chapters of the study outline the problems faced by each sector, the strategy to overcome these problems, the possibilities of growth in each sector and the investment requirements, incentives that need to be provided, the role of science and technology in improving the efficiency and profitability of various industries, the public and private sector R&D facilities and the incentive for the private sector, and the role of public sector.
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CHAPTER 2
INDUSTRIALISATION AND S&T POLICIES OF NIEs AND PARAMETERS FOR SUCCESS
A. R. Kemal
Korea initially focused on training of the workers for labour-intensive exports, it created the various science and technology institutes in 1970s and 1980s which helped in the product development, reverse engineering and adoption and improvement of technologies in accordance with their needs. In the 1990s, Korea actively encouraged FDIs and since she was equipped with the requisite science and technology personnel, the R&D institutions and the skilled workers, they were able to make best use of FDIs, and the technical assistance agreements by way of technology transfers.
By the mid-1970s, Singapore used low-cost labor and low- to middle-level technology for competing effectively in the export market and since then has emerged as a leading industrial economy that specializes in the range of high-end manufactures. Her experience shows that the government institutions by providing necessary guidance and assistance through better human resource development can attract foreign private investment which brings funds, technology and managerial skills.
Malaysia pursued import-substitution industrialization initially, but from 1968 onwards, it has pursued an export-oriented industrialization strategy. From 1986 onwards government emphasized technology development and growth of exports. The various free trade zones were established which were preferred location for large multinational companies because of the increased security, quick customs clearance and efficient administrative support. The Malaysian experience suggests that the incentive to technology-based industries can help in improved R&D activities in the private sector and it also helps in attracting FDI.
Even though various investment, industrial and trade policies and particularly 1997 investment policy emphasized the export-oriented and hi-tech industries, the fact is that Pakistan’s policies continue to favour import substitution industrialization and the traditional industries, though degree of anti-export bias has varied over time and at present is the lowest. The tariff rationalization and integration of Pakistani exports to the world market is expected to result in higher demand for R&D activities in all the sectors of the economy with a view to improving quality and reducing cost of production.
It need to be underscored that Korea, Singapore and Malaysia benefited a great deal from reverse engineering, foreign direct investment, and technical assistance agreements. But all this requires a large reservoir of high quality scientific and technology personnel.
During the 1960s, per capita incomes of Pakistan and South-East Asian economies were
not very different. As a matter of fact, Pakistan was ahead of the South-East Asian countries both in the industrialization process and exports of manufactured goods. How did they manage the transition from a developing economy to the newly industrialized economies (NIEs) and some to the developed economies can be rather helpful for designing the industrial and S&T policies of Pakistan. In this chapter we review the experience of three main countries of the South-East Asian region, viz., South Korea, Singapore and Malaysia and compare it with the development strategy of Pakistan and draw lessons for the formulation of policies in Pakistan.
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South Korea
Industrial development of Korea can be broadly divided into four distinct phases, viz., export drive policy and skilled manpower development in the 1960s; promotion of heavy and chemical industry and local technological capacity building in the 1970s; trade liberalization and technology-oriented industrial policy in the 1980s; and globalization and promotion of information technology industry in the 1990s.
Even though some capital intensive industries were also promoted as a part of import-substitution industrialization, the major thrust of industrial policy during the 1960s was on the promotion of labor-intensive export industries which required a continued supply of skilled workers. Skilled manpower development was the major concern of the Korean government in the 1960s and the manpower development plan was an integral part of over-all development plan. Emphasis was placed on the expansion of technical high schools and institutionalization of vocational training. In 1967, the vocational training law was enacted to facilitate the establishment of public as well as private training institutes including in-plant training program which became the major supply sources of skilled workers in the 1960s and 1970s.
During the 1970s Korean policy-makers shifted the focus to capital and technology-intensive industries. The heavy and chemical industries such as steel, non-ferrous metals, shipbuilding, electronics, machinery, and petrochemicals were selected as strategic industries and government provided all types of support and incentives to these industries. The government made strenuous efforts to build up the local technological capacity by setting up state-funded research institutes and strengthening engineering education. The government drastically expanded the graduate and undergraduate education with special emphasis on such fields as mechanical engineering, and electrical and electronic engineering. The government also established in 1970 Korea Advanced Institute of Science (KAIS), to train high caliber scientists and engineers. Twelve specialized public -funded research institutes were set up in the late 1970s to meet the technological needs of private firms. The major function of these institutes was to develop industrial technology in cooperation with private firms by pioneering new products, new processes as well as adapting and assimilating imported technology.
Korea reshaped its development policy in the 1980s by introducing wide-ranging macroeconomic, trade and industrial policy reforms. The reform aimed at a competitive framework and adoption of market mechanism for allocation and optimal utilisation of national resources and reduction in the government intervention and protection. Technology driven industrialization was the major policy objective with emphasis on localization of key strategic technology, acquisition of high level manpower, and accelerating private sector R&D activities. The industry-specific support system was gradually replaced by the functional support system in which all industries are in principle equally treated and incentives are given to research and development, and manpower development. Korea initiated long-term and comprehensive support programs for SMEs which included promotion of promising SMEs, availability of loans, reservation of certain sub-sectors for SMEs, enacting sub-contracting promotion law, etc. A variety of incentives were further provided for start-ups, new-technology-based SMEs, structural adjustment, etc.
The Korean government in the 1990s made a concerted effort for promotion of the industry that could lead the economy toward the era of information society in the 21st century. The measures to promote IT industry included deregulation of the telecommunication service industry which was characterized by the monopolistic market structure, promotion of the globalization strategy for the Korean IT industry by encouraging FDI in the Korean IT industry through various tax and financial incentives. The government also established Foreign Investment Zones to attract foreign IT investment. The government intensified its support for venture business by enacting a Special Law for Venture Business Promotion in 1997 in order to promote technology-oriented small firms.
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The Korean experience shows that she initially focused on training of the workers for labour-intensive exports, it created the various science and technology institutes in 1970s and 1980s which helped in the product development, reverse engineering and adoption and improvement of technologies in accordance with their needs. In the 1990s, Korea actively encouraged FDIs and since she was equipped with the requisite science and technology personnel, the R&D institutions and the skilled workers, they were able to make best use of FDIs, and the technical assistance agreements by way of technology transfers. The experience of Korea over the four decades shows the successful journey from imitation towards innovations.
Singapore
Singapore has always been a major financial and trading center, but its manufacturing base was quite small in the 1960s. After independence, it sought to promote industrialization as a way of diversifying its traditional role as an entrepot. By the mid-1970s, Singapore used low-cost labor and low- to middle-level technology for competing effectively in the export market. Since then, however, it has emerged as a leading industrial economy that specializes in the range of high-end manufactures. Behind this transformation of industrial sector is active role of the state in achieving dynamic comparative advantage through industrial policies that emphasize education, organized research and development, and investment in social overhead capital. Economic Development Board (EDB) was established with a mandate for upgrading the strengths of local firms, attracting foreign direct investment, encouraging innovation, developing new knowledge-driven capabilit ies, and developing human resources.
Industrial development in Singapore has been mainly driven by foreign direct investment. Combining its desirable locational advantages with carefully designed incentives for foreign investors, it has been able to attract massive foreign direct investment in export-oriented industries. Foreign investors not only brought cash but also technology and managerial skills.
The industrial policy has increasingly stressed industrial upgradation through research and development. The National Science and Technology Board assist the government in promoting the development of scientific and technological capabilities, including the development of manpower and the promotion of private sector research. The push toward a knowledge-based economy in Singapore is evident from the fact that R&D spending more than quadrupled between 1990 and 1999 – reaching $2.6 billion in 1999. In recent years, the government has focused on the development of industrial clusters; and this approach has enabled Singapore to upgrade its technological capabilities and to become the leading manufacturer of high value products.
Singapore experience shows that the government institutions by providing necessary guidance and assistance through better human resource development can attract foreign private investment which brings funds, technology and managerial skills. However, as observed in case of Korea, maximum benefits were achieved because of the human resource development and the availability of quality S&T and R&D facilities.
Malaysia
Malaysia pursued import-substitution industrialization soon after the independence. The tariffs on finished products were higher and exemptions were granted to intermediate inputs and raw materials of the import substituting firms in food processing, metal, chemical and textiles industries. From 1968 onwards, Malaysia pursued an export-oriented industrialization strategy. Various incentives were granted to export-oriented firms. The industries were offered tariff concessions, and tax exemptions for a period ranging between 5-10 years. From 1986 onwards government emphasized technology development and growth of exports. Financial incentives were also extended to all the firms including the small and medium scale industries. With
51
technology, firms engaged in research and design, workers’ training and export promotions could apply for double taxation deductions. This incentive was extended to multinational and local large scale industries as well as small and medium enterprises.
The government enacted the Free Trade Zone (FTZ) Act in 1971, and various zones were established which were preferred location for large multinational companies because of the increased security, quick customs clearance and efficient administrative support. Besides these zones, the government introduced Licensed Manufacturing Warehouses, where all the incentives offered to firms in the free trade zones were extended.
The Malaysian experience suggests that the incentive to technology-based industries can help in improved R&D activities in the private sector and it also helps in attracting FDI.
Pakistan Pakistan’s industrialization strategy has revolved around an import-substitution
industrialization, though degree of anti-export bias has varied over time and at present is the lowest. Relatively higher tariffs on consumer goods than the tariffs on intermediate and capital goods favored the consumer goods industries but hampered the establishment of capital goods and intermediate goods industries. The trade liberalization programme initiated in the 1980s has helped in rationalization of the tariff structure, virtual elimination of non-tariff barriers, and simplification of import procedures. Similarly, all types of restrictions on exports have also been removed. Pakistan has adopted a market-based exchange rate system which reduces the anti-export bias. Even though these reforms have enabled agriculture sector to obtain international market prices for its produce and has exposed domestic enterprises to international competition, there is still a bias towards industrialization and the manufacturing enterprises continue to suffer from the legacy of import substitution. They have yet to re-position themselves to compete effectively in the global market. A more liberal world trading system would dictate changes in the industrial sector priorities for which a clear long-run vision is needed.
With a view to enhancing the role of the private sector in the economy, and to address the problem of operational inefficiency in public sector enterprises, the government launched a privatization program in the Nineties. Though the role of the public sector has been drastically curtailed as a result of deregulation and privatization policies initiated in the 1980s, some industries continue to be dominated by the state owned enterprises. Some of these enterprises produce primary raw materials and intermediate inputs and their inefficiencies adversely impact the downstream industries. For example, the inefficiencies of Pakistan Steel have been the major stumbling block to the engineering industries and the public sector engineering industries make the investment expensive. All the remaining public enterprises in the manufacturing sector should be divested with the clear understanding that the import duties on such products would be rationalized.
Even though various investment, industrial and trade policies and particularly 1997 investment policy emphasized the export-oriented and hi-tech industries, the fact is that Pakistan’s policies continue to favour import substitution industrialization and the traditional industries. The tariff rationalization and integration of Pakistani exports to the world market is expected to result in higher demand for R&D activities in all the sectors of the economy with a view to improving quality and reducing cost of production. Besides tariff rationalization is expected to improve the relative profitability of engineering and chemical industries. These industries not only require skilled workers, but the upgradation of output is also absolutely important; either the technology is imported and adapted in accordance with the country requirements or the technology is improved through innovations. We may underscore that Korea, Singapore and Malaysia benefited a great deal from reverse engineering, foreign direct investment, and technical assistance agreements. But all this requires a large reservoir of high quality scientific and technology personnel.
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CHAPTER 3
NATURE OF TECHNICAL CHANGE AND GROWTH OF PRODUCTIVITY IN PAKISTAN
A. R. Kemal
Whereas estimates of the Domestic Resource Cost for the agriculture sector of
Pakistan indicate that almost all the agricultural activities are efficient, for manufacturing sector they indicate gross inefficiencies. During the period 1992-2001, overall labor productivity in Pakistan grew at a modest rate of 1.48 percent, low as compared to the growth of labor productivity in India, Sri Lanka, Bangladesh, Malaysia, Taiwan, and Korea. However, in the manufacturing sector, it is higher than Bangladesh and India, but is still lower than all the other countries, such as Sri Lanka, Taiwan, and Korea.
For the period 1964-65 to 2000-01, total factor productivity (TFP) of the entire economy grew at a rate of 1.66 percent. The breakdown of the entire period (1964-65 to 2000-01) into sub-periods shows that TFP growth in the overall economy increased at a rate of 3.39 percent during the period 1964-65 to 1969-70. Growth in TFP considerably slowed down in the Seventies to 0.82 percent. However, Eighties witnessed a recovery in the TFP growth and stood at 2.45 percent but slowed down once again in the Nineties to 0.78 percent. This indicates that TFP contributed roughly one-third to the growth of GDP over almost four decades. It also shows that those periods witnessed maximum growth rates when TFP was higher, i.e.1960s and 1980s.
The TFP growth in the agriculture sector was 0.37 percent for the entire period of 1964-65 to 2000-01 although it was higher during the periods and the crops in which new seed varieties were introduced. The negative TFP growth of -0.77 percent in the 1970s was largely due to adverse weather conditions and inadequate supplies of water and fertilizers. In the Eighties the agriculture sector continued to exhibit negative TFP growth (-1.32 percent). This is despite the fact that there was a major breakthrough in the mid 1980s in cotton varieties. However, productivity declined mainly because of pest attacks. During the 1990s TFP growth in agriculture sector recovered to 1.52 percent.
For the period 1964-65 to 2000-01, TFP in the manufacturing sector grew at a rate of 3.21 percent. During the Sixties, TFP grew by 4 percent due mainly to learning by doing coupled with improved export competitiveness. Growth in total factor productivity considerably slowed down in the Seventies to 2.1 percent because of the nationalization policies. The Eighties witnessed a rebound in TFP growth to a healthy 5.38 percent due mainly to private sector participation in the manufacturing sector in the atmosphere of deregulation and decontrol. During the Nineties, TFP again decelerated to 1.64 percent. The main factor in the slow down of productivity growth rate has been the slow embodied technical change resulting from low and falling levels of investment.
Whereas growth rates of total factor productivity in Pakistan have been quite high, it needs to be underlined that in most of the cases it reflected low efficiency levels in the base year. Since the TFP has also increased rapidly in competitive countries, the relative efficiency levels may still be lower. We may also note that the main sources of productivity growth, viz. human resource development, R&D activities and development of engineering industries that provides machines in accordance with the factor endowments of the country, have received relatively less attention in Pakistan.
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Growth of an economy depends on the allocation and utilization of resources, accumulation of inputs and technical change. The countries which fail to save and invest a larger proportion of GDP, have poor human resources and lack technological infrastructure lag behind in the growth process.
Gross Domestic Product (GDP) is a technical relationship between value added and the factors of production, capital and labour. The growth of GDP depends on the changes in factor inputs, capital and labour and technical change. Specifically,
]L e ,K F[e eAY tßt
ta tgt
o= (1)
( ) t1tt IKdK ++= −η (2)
Lt = LFP * WAP (3)
Where
Y is the value added in an economic activity g is disembodied technical change α is embodied technical change in capital t is time period
β is embodied technical change in labour K is capital stock L is the labour. I is investment level δ is depreciation level
η is the obsolescence LFP is labour force participation rate WAP is the working age population .
The growth in capital stock depends on the additional net investment. The gross level of investment depends on the availability of investible resource and the expected profitability. The net investment is estimated by deducting the depreciation and obsolescence from gross investment. While depreciation in an activity depends on the use of machinery, obsolescence depends on the pace at which the technological development takes place in an activity. For example it would be relatively small in the textiles industry and much higher in the information technology. Better capacity utilization and higher investment levels are the only guarantees against obsolescence.
GDP is the aggregation of value added across all the activities in a country:
ii
YGDP ∑= (4)
and i is the subscript for an economic activity.
Flows of production factors to each of the economic activity would be in accordance with the static comparative advantage of an activity provided there is neither any protection nor any fiscal incentives. However, the static comparative advantage in accordance with the factor endowments at a particular moment of time is not necessarily the optimal policy for the long run. For example, if a country embarks on a program of imparting specific skills for acquiring certain
54
competitive advantage in the long run, the government may have to intervene and change the incentive structure. Simila rly, if there is an infant industry such as component manufacturing industry, the country may not have static comparative advantage but may have the dynamic comparative advantage and the government may have to protect or subsidise the industry.
The need to coordinate industrial, S&T and R&D policies cannot be overemphasized. In each of the activity, labour and capital can be combined in different proportions depending on the availability of different technologies to produce a certain product and the ratio of wage rates to interest rates. A country that relies on import of machinery and that too from a country whose factor endowments are different will not allow optimal technological choices. The machine goods producing sector of a country widens the technological choices of the investors.
The production relationship for each of the economic activity may be written as
]L e ,K F[e eAY ittß
ittatg
ioiiii= (5)
In the following, we discuss four variants of equation 5, because each type of technical change is affected by different types of policy variables. Variant I: 0 0;a 0;g iii === β
In this variant, equation (5) collapses to )L ,F(K AY ititioi = (6)
The overall growth would depend only on the growth of factor inputs, i.e. increase in capital stock and changes in the size of labour force. The increase in output in each of the activity depends on the allocation of capital and labour to the economic activity. The growth rate of GDP, therefore, would depend upon an increase in the capital-labour ratios for given amount of labour. Obviously, it would require huge amount of investment if a respectable growth rate is to be achieved. We may note further that if other countries witness technical change, the country will lag behind and the differentia l in wage rates and the per capita incomes across countries would widen. Variant II: 0k 0,a 0;g iii ==>
In this variant, Equation 5 would be
]L ,F[K eAY itittg
ioii= (7)
The disembodied technical change arises from better management practices, learning by doing, reduction in wastage, etc. Equation 7 suggests that country achieves high growth rates with the same amount of capital and labour. The disembodied technical change arises without any additional investment in the machines and equipments and in the human resources. Nevertheless, it calls for better atmosphere where workers are motivated to contribute towards the growth of firms and may be achieved through better relationships between the employers and employees, better management practices, facilitation of the government for better untilisation of resources
55
etc. The technological change so far in Pakistan as shall be seen later has been mainly of this nature. Such technical change has an upper limit and tapers off to a low level over long run. Variant III: 0 0; 0;g iii =>> αβ
Equation 5 translates into:
]L e ,F[K eAY ittß
ittg
oiiii= (8)
If the investments are made in human resources through higher education, skills, better
health facilities, provision of social amenities etc. the productivity levels increase sharply. Various countries have witnessed sharp increases in productivity because of the human resource development. On the other hand, Pakistan has lagged behind in this area which is well reflected in the low literacy rates of around 50 percent, low enrolment rates at primary, secondary and tertiary levels, poor health facilities, poor training facilities etc.
Variant IV: 0 0; 0;g iii =>> βα
The equation in this variant collapses to
]L ,K F[e eAY ttitgt
ioiα= (9)
This is the case where science and technology helps in the growth process due to at least five reasons. Firstly, it helps in improving the productivity levels of existing capital. Second, it helps in selection and adaptation of the equipment in accordance with factor endowments. Third, it helps in the reverse engineering. Fourth, it may result in manufacturing of machines that accord with the factor endowments of the country and new technologies are incorporated in new machines. Fifth, science and technology also help in attracting investment in those activities where otherwise investment is not possible. For example, Hi-tech industry such as engineering and chemicals would require the presence of S&T personnel and R&D institutions. Growth and Nature of Technical Change and Efficiency Levels in Pakistan
Efficiency of an economic activity may be measured by the Domestic Resource Cost of earning (saving) a unit of foreign exchange5. If the cost of domestic resources used up in an activity exceeds the corresponding value added at the world prices, i.e. DRC >1, the activity is inefficient. When DRC <1, the activity is considered to be efficient.
The estimates of the DRC for the agriculture sector of Pakistan indicate that almost all the agricultural activities are efficient. (See Ahmed 2003). However, because the farmers are using lower dozes of inputs and development of new seed varieties have been slow, the productivity of land has been quite low compared to other countries. For the sustained growth, the research and development related to bio-technology, seed varieties, seed multiplication, measures and pest attacks, soil testing, etc. would be absolutely essential.
5 The Domestic Resource Cost (DRC) is essentially a ratio of the cost of domestic resources to the net foreign exchange earned (or saved) by an economic activity. The net foreign exchange earnings (or savings) may be approximated by the valued added at the world prices.
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The DRC estimates for manufacturing sector for 1990-91 reveal that efficiency levels varied rather sharply across different manufacturing industries [Kemal et. al. (1994)]6. On the one hand, some industries have been so efficient that domestic resources are only a fraction of their value added while, on the other, some are so inefficient that they not only wasted labor, capital and non-traded inputs, but their material costs also exceed the value of output. The DRCs for consumer good industries was 6.00 –– so inefficient that the resources used in these industries were six times the value added they generated. However, the intermediate and capital goods industries were quite efficient as the DRCs for these industries stood at 0.22 and 0.82, respectively. Domestic Resource Cost, on average, was 1.20 but for the large-scale industries, considered to be the backbone of any economy, the average DRC was 1.49 percent. Not surprisingly, the export-oriented industries were quite efficient with DRC of 0.547.
Strong growth in productivity is essential for sustaining the competitiveness for the industries in which the country has comparative advantage in the base year and for attaining the comparative advantage where the productivity levels are low in the base year. The growth of productivity needs to be higher than that of the competitor countries for gaining a competitive edge. If it is lower, country loses comparative edge.
During the period 1992-2001, overall labor productivity in Pakistan grew at a modest rate of 1.48 percent (Table 3.1). This is quite low as compared to the growth of labor productivity in India, Sri Lanka, Bangladesh, Malaysia, Taiwan, and Korea. In the manufacturing sector, it is higher than Bangladesh and India, but is still lower than all the other countries, such as Sri Lanka, Taiwan, and Korea.
Table 3.1: Annual Average Labor Productivity Growth (%): 1992-01
Pakistan Bangla-
desh Sri
Lanka India Taiwan Malaysia Korea
Overall 1.48 1.52 2.34 5.05 3.95 4.12 4.56 Manufacturing Sector 2.23 1.98 2.68 1.56 3.99 3.37 7.55 Source: APO, Asian Productivity Data & Analysis 2002. Asian Productivity Organization, Tokyo
We may note, however, that labor productivity is only a partial measure of productivity. An alternative measure that takes into account the other factors of production as well is total factor productivity8. For the period 1964-65 to 2000-01, total factor productivity (TFP) of the entire economy grew at a rate of 1.66 percent. The breakdown of the entire period (1964-65 to 2000-01) into sub-periods shows that TFP growth in the overall economy increased at a rate of 3.39 percent during the period 1964-65 to 1969-70. Growth in TFP considerably slowed down in the Seventies to 0.82 percent. However, Eighties witnessed a recovery in the TFP growth and stood at 2.45 percent but slowed down once again in the Nineties to 0.78 percent. This indicates that TFP contributed roughly one-third to the growth of GDP over almost four decades. It also shows that those periods witnessed maximum growth rates when TFP was higher, i.e.1960s and 1980s.
6 Kemal, A. R., Mahmood, Zafar, and Ahmad, Ather Maqsood, (1994) “Structure of Protection, Efficiency, and Profitability. PIDE. The DRC estimates reported in the study pertain to the year 1990-91 and since then so such study has been carried out. 7 We may add, however, that with tariff rationalization in recent years, most of the inefficient firms in various industries have closed down and efficiency levels in manufacturing industries may have improved over time. 8 Growth in total factor productivity is part of the value-added growth not explained by the increase in factor inputs.
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Table 3:2: Trends in Total Factor Producti vity (TFP) in Overall Economy Since 1960s
(Percent)
Growth Rates Period
Value Added Capital Labour TFP
1964-65 to 2000-01 5.31 2.48 1.17 1.66
1964-65 to 1969-70 7.01 2.83 0.78 3.39
1970-71 to 1979-80 4.66 2.28 1.56 0.82
1980-81 to 1989-90 6.12 2.64 1.04 2.45
1990-91 to 2000-01 4.41 2.38 1.25 0.78
Source: Kemal, Muslehuddin and Qadir (2002) “Global Research Project: Pakistan Country Report”, PIDE, Islamabad.
The TFP growth in the agriculture sector was 0.37 percent for the entire period of 1964-65 to 2000-01 although it was higher during the periods and the crops in which new seed varieties were introduced. For example, TFP grew at an impressive rate of 4 percent in the 1960s because of green revolution technology. The negative TFP growth of -0.77 percent in the 1970s was largely due to adverse weather conditions and inadequate supplies of water and fertilizers and there was hardly any technological breakthroughs. In the Eighties the agriculture sector continued to exhibit negative TFP growth (-1.32 percent). This is despite the fact that there was a major breakthrough in the mid 1980s in cotton varieties. However, productivity declined mainly because of pest attacks. During the 1990s TFP growth in agriculture sector recovered to 1.52 percent thanks largely to market-oriented reforms in the agriculture sector.
Table 3.3: Trends in Total Factor Productivity (TFP) in Agriculture Sector Since 1960s
(Percent)
Growth Rates Period
Value Added Capital Labour TFP
1964-65 to 2000-01 3.89 2.70 0.82 0.37
1964-65 to 1969-70 6.13 1.88 0.25 4.00
1970-71 to 1979-80 2.32 2.01 1.08 -0.77
1980-81 to 1989-90 4.10 4.48 0.94 -1.32
1990-91 to 2000-01 4.54 2.21 0.81 1.52
Source: Kemal, Muslehuddin and Qadir (2002) “Global Research Project: Pakistan Country Report”, PIDE, Islamabad.
For the period 1964-65 to 2000-01, total factor productivity (TFP) in the manufacturing
sector grew at a rate of 3.21 percent (Table 3.4). We may note that the sharp increase in growth of productivity in the manufacturing sector shows a rather high degree of inefficiency in the base year reflected in the very high DRC estimates for the earlier years. For example DRC was 3.31 in 1980-81 but declined to 1.20 in 1990-91.
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Table 3.4: Trends in Total Factor Productivity in Manufacture Sector since the 1960s (Percent)
Growth Rates Sector
Period Value Added Capital Labour
TFP
1964-65 to 2000-01 6.39 2.23 0.94 3.21 1964-65 to 1969-70 8.99 2.96 1.78 4.26 1970-71 to 1979-80 5.48 2.04 1.43 2.01 1980-81 to 1989-90 8.09 2.10 0.61 5.38 1990-91 to 2000-01 3.99 2.09 0.25 1.64 Source: Kemal, Muslehuddin and Qadir (2002) “Global Research Project: Pakistan Country
Report”, PIDE, Islamabad.
During the Sixties, TFP growth in the manufacturing sector exceeded 4 percent due mainly to learning by doing coupled with improved export competitiveness. Growth in total factor productivity considerably slowed down in the Seventies to 2.1 percent because of the nationalization policies that eroded business confidence with concomitant fall in private investment and decline in productivity levels in the nationalized industries. The Eighties witnessed a rebound in TFP growth to a healthy 5.38 percent due mainly to private sector participation in the manufacturing sector in the atmosphere of deregulation and decontrol. During the Nineties, TFP growth in the manufacturing sector again decelerated to 1.64 percent. The main factor in the slow down of productivity growth rate has been the slow embodied technical change resulting from low and falling levels of investment.
Whereas growth rates of total factor productivity in Pakistan have been quite high, it needs to be underlined that in most of the cases it reflected low efficiency levels in the base year. Since the TFP has also increased rapidly in competitive countries, the relative efficiency levels may still be lower. We may also note that the main sources of productivity growth, viz. human resource development, R&D activities and development of engineering industries that provides machines in accordance with the factor endowments of the country, have received relatively less attention in Pakistan. Table 3.5 shows the poor investment levels in such activities in Pakistan. For sustained growth of productivity levels, it is necessary to invest in these activities.
Table 3.5: Human Resource Development Activities Country Expenditure on
education (% of GDP)
Expenditure on health
(% of GDP)
R&D Personnel (thousands)
R&D expenditure (% of GDP)
Bangladesh 4.02 0.90 - - China 6.19 5.77 138.4 2.16 India 3.45 0.93 308.39 0.62 Indonesia 0.09 0.22 - 0.05 Iran 4.30 1.51 0.73 0.64 Japan 4.71 1.89 1000.01 3.29 Korea 6.50 2.63 178.94 2.96 Malaysia 7.13 2.22 23.26 0.82 Pakistan 1.60 0.70 16.20 0.20 Philippines 3.53 3.43 25.16 0.15 Singapore 3.95 0.88 24.88 2.13 Sri Lanka 2.44 1.37 - 0.03 Thailand 4.03 1.59 - 0.12 Vietnam 3.19 0.87 0.34 Source: APO (2003). Note. For Iran, Japan and Philippines the education and health estimates refer to 2000. The health
estimates of Korea also refer to 2000. R&D personnel data for India refers to 1998, that of Malaysia and Pakistan to 2000, and of Philippines and Thailand refer to 1996. The R&D expenditure estimates for India. Malaysia, Pakistan, refers to 2000 and of Thailand to 1999.
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CHAPTER 4
A FRAMEWORK FOR THE INDUSTRIAL GROWTH BASED ON SCIENCE AND TECHNICAL DEVELOPMENT
A. R. Kemal
In a rapidly changing international economic environment, science and
technology is vital for sustaining the development momentum but the state of science and technology has been far less satisfactory in Pakistan. While on the one hand pursuit of import substitution industrialization strategy for a rather long period left very little incentives for research and development by the local industry, on the other hand lack of strong engineering foundations, loss of qualified personnel to the foreign countries, and weak linkage between industry, academic, and research institutions have been responsible for the poor state of science and technology in Pakistan.
Technological advancement is critical for attaining greater competitiveness in the world economy. Most of Pakistani firms are on the lower end of technology and government can play an important role in enabling the domestic firms to compete in the world market by facilitating technological up-gradation involving three elements. Firstly, production capability comprising operation and maintenance of production facilities; secondly, investment capability comprising expansion of capacity and establishing new production facilities; and thirdly, the innovative capability to create and carry new technological possibilities. While all of these are important aspects and need to be promoted, it seems that Pakistan in the short and medium term may focus on the first two elements but at the same time continues to improve its R&D capability for the medium and long run growth.
Basic objective of increasing value-addition can be realized at least in three ways. Firstly, the country may invest in large number of activities; second, in each of the industry more sub-processes may be added with the passage of time; and third, through improvement in quality, value of output of the same quantity may be enhanced.
The investment rates in Pakistan have been low though in 2003-04 it has increased. Whereas in the past the investible resources have been the major problem; at present it is the relatively low levels of demand for investment. The investment rates can rise rapidly provided the investors are convinced of long run profitability. The business friendly environment revolves around consistent economic policies, strong macroeconomic fundamentals, deregulation, privatization, better law and order with credible police, law and judicial system, better regulatory environments, an efficient tax and customs administration, labour policy that motivates the workers, financial reforms and improvement in infrastructures.
Innovation is costly and unless the producers feel that they can benefit from the innovation, they would not invest. Since such investments are expected to be quite high, only big businesses would have R&D departments. With a view to boosting R&D activities in the private sector, vertically integrated units need to be encouraged.
Pakistan has pursued an import-substitution policy and that has resulted in high cost and low quality products. Export orientation ensures low cost and good quality product because otherwise the country would not be able to compete.
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There are three technology policy instruments, viz. technology transfer, technology diffusion, and indigenous R&D. With a view to realizing the objective of technology transfer, diffusion and development, technology infrastructure needs to be strengthened. This can be overcome by Human resource development through education, health, nutrition and training, the key determinant of productivity, and development of S&T personnel in which science and technology personnel of high quality are basic. The country needs these personnel for running the industries, the R&D institutions and the university and institutions that impart knowledge to the science and technology students.
The industrial clusters, export processing zones, industrial zones, and cities for various manufacturing activities have played an important role in various countries, particularly in the Far East Asian countries. Clusters of industries connected through vertical and horizontal relationships in Pakistan may be developed. Government may set up an Authority for improving the existing industrial clusters and creating more clusters, by acquiring full knowledge of the problems being faced by the specific industries and creating such facilities required to improve the quality of products with higher productivity.
The quality of product is basic to increasing value added and until the brand name is accepted, certification is key to get the benefits of quality improvements. Certification is important for almost all the industries, it is of crucial significance for the food industries, chemicals, electric and non-electric machinery and the automobile industry.
The long run industrial vision of Pakistan comprises rapidly growing, broad-based, dynamic and efficient industrial sector that can compete in a highly competitive global economic environment. It can be realized by diversifying the industrial base through higher investments and strengthening technological base of the country. These objectives can only be realized through a coherent short, medium and long run strategy. Key elements of the proposed strategy in this study are reliance on the private sector for growth and development, while the role of public sector will be of a facilitator and an efficient regulator; and the development of science and technology and its interface with the industry.
It was noted in the previous chapter that investment, human resource development and the development of science and technology are critical for long-run industrial success. While in a rapidly changing international economic environment, science and technology is vital for sustaining the development momentum, the state of science and technology has been far less satisfactory in Pakistan even compared with the other emerging economies. While on the one hand pursuit of import substitution industrialization strategy for a rather long period left very little incentives for research and development by the local industry, on the other hand lack of strong engineering foundations, loss of qualified personnel to the foreign countries, and weak linkage between industry, academic, and research institutions have been responsible for the poor state of science and technology in Pakistan. 4.1 TECHNOLOGICAL UPGRADATION
The technology refers to collection of physical process, skills and structure of activities that transforms inputs into outputs (production function discussed in the previous chapter). It is the practical application of knowledge and skills to the establishment, operation, improvement and expansion of facilities, and designing and improvements of output. The technological capability involves assimilation, use, adopt and change the existing technologies. In economic terms, the technological improvements imply a reduction in cost of production. Therefore, the most sophisticated technology may not be the optimal technology for the country.
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Technological advancement is critical for attaining greater competitiveness in the world economy. As noted earlier, most of Pakistani firms are on the lower end of technology and government can play an important role in enabling the domestic firms to compete in the world market by facilitating technological up-gradation involving three elements. Firstly, production capability comprising operation and maintenance of production facilities, i.e., both efficient operations within the parameters of technology already employed and to adopt and improve the existing technologies. Secondly, investment capability comprising expansion of capacity and establishing new production facilities, i.e., analysis of profitability, specification of projects, ascertaining the prospects for viability, procurement of hardware supplies, choice of sites and execution of projects. Thirdly, the innovative capability to create and carry new technological possibilities, i.e., capability to invest, innovate and improve existing technology beyond the original design parameters. While all of these are important aspects and need to be promoted, it seems that Pakistan in the short and medium term may focus on the first two elements but at the same time continues to improve its R&D capability for the medium and long run growth.
All the three require specific types of personnel including scientists, technologists and skilled workers. However, we may note that in the initial stages, most of the activities would be of imitative nature while at a later stage most of the activities would be R&D based. The imitation phase does not require specialized investment in R&D and information channels, because the firms are not required to generate new knowledge. Nevertheless such activities have to be initiated even at an earlier stage as it is pre-cursor to the innovation stage. Moreover, at the imitation stage, basic scientific knowledge and skilled work force are required. If it is a standardized technology, reverse engineering may be sufficient but if the product is complex and problematic, it would require substantial help through technology transfer either by way of technical agreements or joint venture.
Box 1
Elements of Technological Capabilities Three types of capabilities are required to ensure the use of S&T and these include:
i) Production capability • Production management of the established facilities • Production engineering for optimising the operations including
o Raw material control o Production scheduling o Quality control o Trouble shooting o Adaptation of processes and products to changed circumstances.
• Repair and maintenance of physical capital.
ii) Investment capability: • Skill acquisition • Identification of projects under alternative design concepts and feasibility
studies • Project execution: project management, project engineering,
procurement, embodiment in physical capital.
iii) Innovative capabilities: • Basic research • Applied research for knowledge with specific commercial implications • Development: Translating technical and scientific knowledge into
concrete new products, processes and services.
Source: Kim [1997].
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The need for internal capability to identify the nature and source of relevant technology, to negotiate transfer or reverse engineering, and assimilate to meet the specific market needs and availability of materials cannot be overemphasized. Imitation may also involve design copies, creative adaptation, technological leap frogging and adaptation to other industries, i.e., creative imitation. This may also mean products with new features involving substantial investment in R&D activities. While the producers may use the brand names of the original manufacturer and receive the knowledge of technical advances in the product, they may have their own brand names and improve the product through R&D.
Innovation is a pioneering activity, arising from firm’s internal competencies to develop a new product in the market. As noted earlier, imitation stage is a pre-cursor to innovation as a number of skills and activities for reverse engineering can be transformed into R&D. The innovators benefit the producers as it has no competitor but that can only be ensured if intellectual property rights are effectively implemented. The internalization of benefits from innovation is necessary and it helps the innovator in a number of ways including the building of image and reputation, brand royalty, technological leadership, setting the product standards, access to distribution, experience, barriers through patents, etc.
Whereas science and technology personnel and Research and Development institutions are absolutely important for sustained economic growth, they may not be sufficient. For sufficiency, demand for these countries must be generated. In the past due to import-substitution industrialization strategy there was hardly any demand because the producers could sell product of any quality at extremely higher prices. However, with reduction in tariff rates, removal of non-tariff barriers and tariff rationalization, producers have not only to compete against the imported goods, they also have to compete in the international market. Accordingly, the incentives to introduce new products, improvement in quality and standards and reducing the production costs would create the demand for S&T and R&D activities. Besides the establishment of hi-tech industries would also generate demand for such activities.
Technological development has two sides, demand and supply, and unless both are addressed simultaneously growth would be constrained. Demand side of technological development, the need felt by producers for technological change, is the industrial policy. Supply side comprises strengthening of the technological capability of the country through science and technology policy. 4.2 INDUSTRIAL POLICY
To diversify and broaden the industrial base, it is necessary to encourage investment in the industries capable of exploiting dynamic comparative advantage, exhibiting strong backward linkages, and having healthy future growth prospects. Experience of Asian economies including Japan, Korea, and Singapore, show that targeted intervention by the government along with sound public-private partnership are instrumental in fostering a wide range of new industries that can compete effectively in the global marketplace. Accordingly, industrial diversification policies may be designed in close consultation with the private sector.
Basic objective of increasing value-addition can be realized at least in three ways. Firstly, the country may invest in most of the activities, i.e., horizontal expansion. It may neither be feasible nor optimal as the country may not have comparative advantage in a particular product. Pakistan may select a few sectors for growth and leave it to the private sector to choose the optimal mix of activities. Second, in each of the industry more sub-processes may be added with the passage of time. Third, through improvement in quality, value of output of the same quantity may be enhanced. The present strategy proposes to focus on selected economic activities where country has comparative advantage or can secure competitive edge through training and S&T; to
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increase value addition in each of the activity through vertical integration; and improvement in quality.
Demand for new technologies would be generated through higher investment levels, restructuring of industrial sector, enabling producers to internalize benefits from innovations and export orientation. 4.2.1 Raising the Investment Levels
As noted earlier, investment plays a crucial role in growth process by not only adding to productive capacity but also by improving the technological base. Therefore, creation of a market-friendly business environment is absolutely essential to spur industrial investment, economic growth and demand for R&D.
The investment rates in Pakistan have been low though in 2003-04 it has increased from 16.4 to 18.1 percent of GDP. Whereas in the past the investible resources have been the major problem, at present it is the relatively low levels of demand for investment. The investment rates can rise rapidly provided the investors are convinced of long run profitability. The business friendly environment revolves around consistent economic policies, strong macroeconomic fundamentals, deregulation, privatization, better law and order with credible police, law and judicial system, better regulatory environments, an efficient tax and customs administration, labour policy that motivates the workers, financial reforms and improvement in infrastructures.
Consistency of Policy: Investment levels exceeded 20 percent of GDP only in the periods when the investors perceived continuity of policies in the early 1960s and early 1990s. Considering that for more than three years government’s economic policies have been consistent, perception of investors are changing rapidly.
Strong Macroeconomic Fundamentals : Lower fiscal deficit, good balance of payments situation, stability of exchange rates, higher foreign exchange reserves, availability of funds at competitive rates, openness of trade etc. help a great deal in attracting investment. At present Pakistan has strong financial macro-fundamentals and can attract investment.
De-regulation and Privatisation Policies: Pakistan has divested most of public sector manufacturing enterprises and has privatized four out of 5 public sector banks. It intends to privatize various public utilities. Similarly, over the last two decades there has been considerable de-regulation. Nevertheless, investors feel that second generation reforms and further de-regulation is absolutely necessary for reducing the cost of business.
Law and Order Situation: Law and order situation has deteriorated since the early 1980s and after 9/11 events has deteriorated further. While efforts are being made to improve the situation, more efforts in this direction are absolutely important. Government may accord priority to police and judicial reforms.
Regulatory Environment: Regulatory uncertainty may be reduced if the frequency of changes in the rules affecting businesses and making all rules transparent is reduced and by removing discretion from the administration of rules. Regulations relating to labour, health and environment, besides CBR regulations, may be made transparent. Businesses have to comply with a host of regulations relating to work environment including health and sanitation, product standards, and taxation etc. Excessive discretionary powers in the hands of the enforcing agencies often lead to harassment of enterprises and opens up avenues for corruption resulting in loss of business confidence. To develop a viable industrial sector, there is a need to put in place a regulatory and legal environment that is conducive for private businesses.
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Tax Administration: Whereas to some extent there has been CBR restructuring, more is needed. The discretionary powers of tax administration may have to be curtailed and the duration of contact between CBR and the businessmen is reduced. The self-assessment schemes, reduction in rates of taxes, transparency, improving custom’s procedures, information flows, documentation related regulations and distribution/collection system etc. is expected to result in higher confidence levels of the investors.
Labour Policy: Whereas an effort has been made to consolidate labour levies, both workers and employers are not that happy over the new Industrial Relations Act. The existing system of collecting tax levies where a number of government departments collect labour levies is rather cumbersome. Designating a single agency to collect all the labour levies, and linking benefits to workers with productivity levels would help in further improving the business climate.
Financial Developments: A well-functioning financial system that efficiently channels investible funds to most productive uses is essential for industrial development and growth. The measures to remove distortions in the financial system, minimizing government’s interference in the banking system, and strengthening the prudential regulations are expected to reduce the large spread between the deposit and lending rates. The market-oriented and private sector-led financial sector is expected to resolve most of the financial sector problem.
Power Supplies: Three main issues of power, viz. long waiting periods for new connections, frequent outages and high prices need to be resolved on urgent basis. The predictable and transparent regulatory framework which allows the public entities and private firms to run efficiently, to do away with cross-subsidising and improvement in operational efficiency of WAPDA and KESC would go a long way towards that direction. WAPDA and KESC may introduce the bulk buying rates for the manufacturing sector with a view to reducing the cost of production of the manufacturing sector.
Communications: Though the quality of telecommunications has improved in recent years, there is still room for further progress in terms of improvement in efficiency and expansion of fixed line connections. With the advancement in information technology, the businesses all over the world are increasingly relying on the internet for communication purposes and carrying out their business activities. While the usage of internet in Pakistan is on the rise, poor connectivity and slow speed continue to be the major problems.
Transports: The road transport is the dominant mode but the current state of the roads is far from satisfactory. The quality of air and shipping services is marginally better but costs are high owing to lack of competition. The railways are cost effective for long haul but the rail trafficking suffer from inefficiencies. Due to higher cost of alternative transportation modes, bulk of the freight is handled by the trucking industry resulting in overuse of the road network. The freight handling costs at the ports in Karachi and Qasim, are reckoned to be several times higher than those of comparable ports in the region. Government may encourage the private sector participation in infrastructure through considering public -private partnerships, supply contracts to private sector, management contracts and different variants of build-own-operate and transfer (BOOT). Government may collaborate with the private sector to develop export processing zones and industrial zones where modern infrastructure is provided9.
Improvement in law and order situation: Law and order situation plays an important role and reforms of various institutions such as political and judicial reforms would go a long way in promoting investment.
9 A recent example of public-private partnership in infrastructure projects is the construction of a new international airport at Sialkot.
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4.2.2 Restructuring of Industries
The government may select a few economic activities in consultation with the private sector. The present study proposes that in the manufacturing sector, besides traditional industries of food, textiles and leather, Pakistan may focus on chemicals, electronics, electrical and non-electrical machineries. Since basic strategy is the promotion of private sector who should make an optimal choice of economic activities, the study proposes four pronged strategy. Firstly, protection to various economic activities may be neutral and let the private sector decide where to invest. Secondly, with a view to providing equal effective protection rates to various sub-processes, proper cascading of tariffs would be ensured. Third, the basic raw materials and marginally processed raw materials and import of machinery may be duty free. Fourth, fiscal incentives may be used for diversification of activities towards those that have high growth potential. Government may provide maximum fiscal incentives to pioneer industry, high technology industry and strategic industries.
Pakistan used to have five year tax holidays for pioneer industries in the 1980s and 1990s but hardly any investor made any use of it. This may be re-introduced and be provided to the industries using new and emerging technologies. Similarly, higher incentives may also be provided to strategic projects that involve products or activities of national importance. These include heavy capital investment with long gestation periods, have high levels of technology, and are integrated, generate extensive linkages, and have significant impact on the economy. These may include companies undertaking activities in the production of specialized machinery and equipment, namely, machine tools, plastic injection machines, plastic extrusion machinery, material handling equipment, packaging machinery, robotics and factory automation equipment, specialized/process machinery or equipment for specific industries, and parts and components of the machinery and equipment. It needs to be underscored that diversification towards Hi-tech industries is not possible without S&T personnel, skilled workers and R&D institutions.
4.2.3 Internalising the Benefits from Innovation
Innovation is costly and unless the producers feel that they can benefit from the innovation, they would not invest. Since such investments are expected to be quite high, only big businesses would have R&D departments. With a view to boosting R&D activities in the private sector, vertically integrated units need to be encouraged. Such industries may be provided maximum incentives as of the pioneer industries and vendors may be considered as a part of chain in the vertical process. Vendors may also be allowed same tax concession as to the assemblers. Similarly, new and existing companies that undertake design, R&D and production of qualifying automotive component modules or systems may also be provided similar incentives. Obviously, without effective implementation of intellectual property rights, there is little likelihood of innovation. 4.2.4 Export-Oriented Industrial Policy Pakistan has pursued an import-substitution policy and that has resulted in high cost and low quality products. Export orientation ensures low cost and good quality product because otherwise the country would not be able to compete. With a view to encouraging exports government may ensure:
• Tariff rationalization;
• Duty-free imported raw materials;
• Freight subsidy;
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• Subsidies in the participation of fairs and exhibitions and holding specific fairs for Pakistan;
• Subsidy for introducing the products in the export market; and
• The assistance of embassies in locating the demand for products.
4.2.5 Supply Side of Technology
There are three technology policy instruments, viz. technology transfer, technology diffusion, and indigenous R&D.
Technology Transfer: This may take place through import of capital goods, production under foreign licenses, technical assistance programs and the foreign direct investment. Pakistan’s policy is quite liberal in terms of payments for licensing and technical assistance and the FDI. However, the transfer of technology would take place only if S&T personnel as well as skilled workers are available.
Technology Diffusion: This plays a rather important role in overall upgrading of the technological capability. If technology is linked to just a single firm, the benefits are limited. Specialised agents including capital goods producers, consulting engineering firms and public research institutes can be helpful in diffusion of technology. There have been only a few capital goods industries in Pakistan, and the number of local consulting engineering firms is also limited. Indigenous Research and Development
R&D development is crucial for growth and government has to play an important role by setting up R&D institutions in the public sector and an incentive package for the private sector to participate in R&D activities. The government may revitalize the PCSIR and may have various institutes which carry out R&D activities for specific industries. For basic research the university personnel are used with specific projects drawn out by various public R&D industries, Ministry of Science and Technology or the Higher Education Commission. Such research must be demand driven.
With a view to realizing the objective of technology transfer, diffusion and development, technology infrastructure needs to be strengthened. Main elements of the infrastructure are discussed below: i) Human Resource Development
Human resource development through education, health, nutrition and training is the key determinant of productivity. While education and health indicators show some improvement over time, her human indicators remains poor. An educated and skilled labor force is the backbone of a modern industrial sector but unfortunately, little attention has been paid to a demand-driven system of education and training in Pakistan.
There is an urgent need for a comprehensive survey of existing training schemes by skills and the demand for skills in the existing and future industries. Government may examine the performance of skill councils established in each of the province and the experiment in Punjab of the technical education. Government may encourage private sector to open up training institutions by providing them the seed money, but regulating the syllabus as well as fees.
At present technical education is being imparted by 57 Technical colleges and over 700 Vocational Technical Institutions but unfortunately, most of the technical and vocational training has little relevance for the industry. Lack of linkages with industry, poorly trained teachers with
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low salaries and poor management have been responsible for the poor quality of graduates from these institutions. Government of Punjab has established Technical Education and Vocation Training Authority (TEVTA) which is a good example of the private/public partnership. Whereas TEVTA is a major step, so far it has failed to identify the type of technical manpower and the quantum of training required to fill the present gap and the future requirements. Secondly, technical institutions are not equipped with up to date training materials/equipment and the student graduating from such institutions will be of little use to the industrialists. Need for upgrading the existing technical institutes and training centers with the desired machinery and equipment for training of the skilled workers and floor and middle class supervisors is, therefore obvious. The equipment must be such that the students are trained to skillfully handle the production machinery to produce quality goods with higher productivity. Third, for quality education, training of teaching staff is absolutely necessary. Not only quality teachers need to be inducted, in-service training should be a regular feature. Practical training of the teachers should be arranged in the factories so that they are well aware of the factory requirement of a specific type of trained worker. Fourth, there is a need to establish curriculum development and review departments in each of the institutions. Teams of experts from specific fields, actually engaged in the teaching of specific subject and the technically qualified managers in the factories be assigned to develop the curriculum. The curriculum must be reviewed periodically by taking into consideration changes in the production techniques, introduction of new technology and the bottlenecks which the teacher and the students faced during the course of their studies.
Keeping in view the need of skilled workers at various levels in the country, it is proposed to have two year certificate course for the workers, one or two year’s diploma course for supervisors, and the diploma/degree of polytechnic institutes, besides an apprentice program.
Two Years Certificate Course: The course is designed to produce skilled work force for different industrial activities. In the second year they would be provided commercial jobs by the institute as a sub-contractor.
Diploma Course for Supervisors: The Diploma Course of two years will be designed to produce supervisors who are well versant in quality control techniques. Before the award of degree, they must have at least three months apprenticeship in the relevant industry.
Polytechnics: The theory and practical courses need to be thoroughly revised and updated in accordance with the demand of industries and latest production techniques. The students must be made aware of quality control management and methods, the use of quality control tools and instrument, maintenance and calibration of instruments, preparation of quality control record and its presentation to the higher management. All the graduates must have six months work experience with some industrial units to qualify for diploma.
Apprentice Program: For the up-gradation of technical know-how, development of Sandwich Apprenticeship Training Courses may be initiated. Initially it may be started in Public Private Sector partnership and government provide stipend to the apprentices who may get training as a fresh graduate from a polytechnic or in-service training in a recognized industrial unit or institution. Once the industry is convinced of the fruits of investment in up-gradation of the manpower, the government may not be required to further fund this activity.
4.3 DEVELOPMENT OF S&T PERSONNEL
For an S&T based industrial growth science and technology personnel of high quality are basic. The country needs these personnel for running the industries, the R&D institutions and the university and institutions that impart knowledge to the science and technology students. The high quality education of science and technology may be acquired either form outside the country or through establishment of good learning institutions within the country.
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In Pakistan there are only a handful of universities and institutes that are engaged in technology and engineering teaching while almost all the public sector and some private sector universities are engaged in the teaching of natural sciences. However, the quality of teaching is somewhat suspect. Besides, most of the universities teach at the undergraduate levels though a few have post-graduate programs as well. There is an urgent need to set up an Advanced Institute of Sciences which is properly equipped with the teachers, library, labs and other infrastructure. This institute would set standards for all the other universities and institutes to emulate. The government may consider setting of the “Mono” institutes to produce graduates and post graduate engineers to handle different sub sectors of the industry.
Quality of teaching would not improve in the absence of properly qualified teachers and other teaching facilities including library facilities, access to computers and software and excellent laboratories. It calls for significant strengthening of the existing universities. The upgradation of professional staff of various institutions and universities needs to be accorded top priorities. The trend of having a Ph.D. program with a handful Ph.D. staff should be discouraged. What is needed is the quality manpower and not a large number of Ph.Ds without adequate knowledge. It needs to be underscored that whereas in India a large number of post-graduates successfully complete Ph.Ds every year, most of them are not gainfully employed. Only the graduates from better schools find employment within and outside the country.
Since the teaching requires command over the subject, the universities may acquire those Ph.Ds. who have been educated at best schools of the world and have done course work after completing the Masters in natural sciences or bachelor of Engineering from Pakistan. We may note that through research only without having any course work after Masters from Pakistan may be quite good for research activities but may not be of much use for teaching.
No doubt it is not all that easy to find such professionals and it is even more difficult to retain them. The program initiated by the Higher Education Commission to equip the teachers with Ph.D. is quite laudable and should continue. However it must ensure the promising students are sent to the best schools in the world. While all such persons may be asked to sign a bond so that the money spent on these professionals is recouped, efforts must be made to create an atmosphere that helps in retaining them. This may include better job conditions, promotions based on the performance, the negotiable salaries, etc.
Course contents of the programs need to be periodically reviewed keeping into considerations the changing requirements of the industry and recent developments in the subject. To ensure that the universities do so the quality of teaching and the staff of various universities should be properly rated in a transparent way. This rating may be done in at least four different ways. Firstly, productivity of the professional by way of contribution to knowledge. Second, rating on the basis of the qualifications of the staff of the university. Third, the quality of instruction. Fourth, placement in the jobs.
The university and institutes are expected not only to produce S&T personnel, they are supposed to be also hub of the basic research. The induction of Ph.D. staff in technical universities would hopefully help in developing a culture to undertake research projects of commercial importance provided necessary infrastructure in terms of qualified and experienced supervisory staff and equipment is available. There should be a very strong linkage with the local industry with a view to improving the quality and productivity of goods of commercial value. Once the private sector is convinced that the universities can deliver, they will approach them directly. The rules for taking such consultancies should be liberal with little discretion to the top management. It will help in more research as well as in retaining the staff. Government should also provide grant for basic research. While the typical bureaucratic procedure to evaluate
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research work would be meaningless, an effort must be made to come out with credible system of award of such grants.
4.4 THE INSTITUTIONS FOR DIFFUSION OF TECHNOLOGY AND RESEARCH AND DEVELOPMENT
Pakistan had established ‘Appropriate Technology Organization’ in the 1970s but it
failed to do the job assigned to it. The government may consider establishing a scientific and technological information center that disseminates technical information for acquisition of proper technology. However, for effectiveness of such centres, it is necessary that they are manned by the competent science and technological experts and even more importantly, the R&D specialists should have interest and knowledge of manufacturing know-how. Such institutions not only coordinate diffusion exercises, they help in industrial standardization, quality management and technical assistance. These institutions may help private firms in pioneering new products and processes and assimilating imported technologies. The Engineering Development bard can play an important role in diffusion of technology. Government may set up diffusion agencies through private-public partnership for various types of industries.
There are very few engineering consulting firms in Pakistan. These firms can be rather helpful in the selection and adaptation of technologies. Government may promote such firms in a variety of ways including contracting of procurements for public sector, the concessions on import of machinery and equipment and income tax incentives.
Government may select products for improving quality, developing innovative ideas for future development and energise overseas marketing strategies. Instead of having just one institute like PCSIR, a large number of industry-specific organizations may have to be established. They must develop in-depth capabilities in the primary research areas. Such centres may attract corporate R&D laboratories.
Whereas government may also set up institutes, the basic strategy would be reliance on the private sector for improvements in technological capability. Tax incentives may be provided to promote corporate R&D investment in the form of reduced tariffs on import of R&D equipment and supplies, deduction of annual non-capital R&D expenditures and human resource development costs from taxable income, and exemption from real estate on R&D related projects. Also included in such schemes could be tax reduction scheme, technology development fund out of the export cess or by the industries who may set aside for R&D. The subsidies may be provided on cost of acquiring technology, promotion of technology-based small firms, reducing the cost of commercialization locally generated technology, reducing the cost of introducing new products and promotion of venture capital.
Pakistan Council for Science & Technology has already initiated to collect information about the R & D institutions regarding the facilities and the manpower available with them. After conducting a survey of industrial sector regarding their exact requirements for induction of new technologies/processes to improve the quality and productivity, bottlenecks presently being faced by them in this regard and about the introduction of new products using a major part of local raw materials, a clear and definite direction should be available to chalk out a comprehensive R &D plan for future action. 4.4.1 Industrial Clusters, Industrial Cities and Zones
The industria l clusters, export processing zones, industrial zones, and cities for various manufacturing activities have been set up in various countries with a view to ensuring that
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producers have access to the infrastructures and do not face bureaucratic hurdles. They have played an important role in various countries but particularly in the Far East Asian countries.
The clusters are generally formed in three different ways. Firstly, there may be some anchor firms who decide location of a cluster through optimizing behaviour by comparing economies of scale, transaction costs etc. Second, foreign firms select locations by considering not only the availability of cheap unskilled labour but also skilled labour, but a host of other factors including the infrastructure (highways, ports, electricity supply, etc.); institutional framework (legal systems, participatory actors, coordination among actors, etc.); and government support in terms of laws, taxation and finance. Third, the government sets up clusters to avoid the problems relating to regulations, bureaucracy, and the existing legal framework.
Since the first two would evolve when the major firms or foreign firms take interest in developing such clusters, the government can set up clusters, zones, and cities for attracting investment as they will provide quality infrastructure and institutions. The infrastructure and administrative advantages of firms choosing to locate in the Industrial Zones are significant and that these factors have contributed towards the agglomeration of foreign invested firms and the promotion of economic growth.
Clusters of industries connected through vertical and horizontal relationships in Pakistan may be developed. The clusters have critical mass that helps in sharing knowledge and resources and stimulating creativity, innovation and entrepreneurship. Sustained competitive advantage can be produced by mutual support and coordinated development of these demand condition, competition condition, factor condition and support condition.
The export processing zones of Pakistan have met with only limited success. The industrial zones were established in 1990s but after withdrawal of incentives they became irrelevant. Gwadar Industrial Zones and textiles city are good beginning. However, one may make use of the areas beside Motorway for forming various clusters. For example, Chakri could be cluster of software industries and Pindi Bhattian of textiles.
Clusters are most important for SMEs because they provide cost-effective opportunities to deliver targeted technical assistance for upgrading technology, management and marketing. The clustering leads to greater efficiency and flexibility not attainable by individual firms operating in isolation. 4.4.2 Common Facility Centers
The common facility centers help in the introduction of new technology, production of better quality goods and higher productivity levels. It enables the industry to compete in terms of price and quality in the local market and exports. They are rather useful for the micro, small and medium enterprises. Since such units neither have the knowledge nor the resources to acquire new technology, the government must set up such centres initially but eventually they should be transferred to private sector. These centres would help in the selection of proper technology and documentation to protect the SME’s rights.
These Centers can provide testing facilities and extend advisory services for higher productivity with standardization to the sub-contractor. They help in gaining greater competitive strength and developing collective efficiencies; providing common services to improve forward and backward linkages with markets and with suppliers of inputs; cooperation between the firms in upgrading technology; organizing consultative meetings and to disseminate information; development of sub-sector business associations to provide leadership and coordination; provision of essential machining facilities, which should be need based; and to forge links
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between enterprises and the research and technological development being under taken in institutions of higher learning and public financed research centers.
Government may set up an Authority for improving the existing industrial clusters and creating more clusters, by acquiring full knowledge of the problems being faced by the specific industries and creating such facilities required to improve the quality of products with higher productivity. 4.4.3 Incubators
The incubators may be technology based to ensure proper commercialization of their research products and linked to universities and research institutions or they may be industrial incubators for developing small businesses as vendor for components and services. Single business incubators may focus on special sub-sectors, such as biotechnology, informatics, light engineering, handicrafts etc.
The government may provide the necessary support to incubators in the form of low or no rent and operating subsidy, until rents and fees from the tenants match operating expenses. Thus the business incubator itself runs as a business, with the prospects of becoming self supporting when operations are fully established.
4.4.4 Certification
The quality of product is basic to increasing value added and until the brand name is accepted, certification is key to get the benefits of quality improvements. Whereas Ministry of Science and Technology has set up an accredition agency and is a step in the right direction, it may not be sufficient. What matters is the confidence of customer in the accredition agency. Since new Pakistani accredition agency will be acceptable only when they earn good reputation, it is essential that there are counter certification. If Pakistan accredition agencies are joint ventures of the reputed accredition agencies of the wor ld, it would help in not only increasing total exports but also their unit values. Besides, domestic consumers will no longer be opting for the imported stuff.
Whereas certification is important for almost all the industries, it is of crucial significance for the food industries, chemicals, electric and non-electric machinery and the automobile industry. Unless food products are properly certified, it is hazardous to use domestically and almost impossible to export. The other industries which are to be accorded priority also need certification because most of the components have to be of a specification and quality that fits in the assembled products.
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Annexure 4.1
Development of the electronic information industry in Tianjin in order to improve its competitive advantage and bring the clustering effect into full play. The solution is as follows:-
(1) Tianjin’s electronic information industrial clusters should combine industrial advantage, policy advantage, low cost advantage and location advantage.
(2) Structure of industrial clusters should develop from ‘single core’ to ‘multiple cores’ to form a competitive pattern within the region and to transfer and improve electronic information industrial technology.
(3) Local industrial clusters with self-strengthening mechanism should be cultivated. Product chain clusters should be turned into innovation chain clusters so as to change regional comparative advantages into competitive advantages.
(4) To speed up the process of reform for state-owned enterprises in the electronic information industry and to further complete institutional network within industrial clusters.
(5) The electronic information industry should develop towards specialization, interconnection, internationalization and clustering through the combination of technology, institute and market.
(6) From promoting investment by favourable policy, sound infrastructure and convenient trade environment to promoting investment by improving the ecological environment of enterprises in regional clusters.
Following Industrial Support Centers have been identified for establishment throughout Pakistan, whose detail is available in the main report:
1. Light Engineering Support Center, Rawalpindi
2. Fan Support Center, Gujrat
3. Glass and Ceramics Research, Development and Testing Center, Gujrat
4. Engineering Support Center, Gujranwala
5. Technology Support Center, Daska
6. Support Center for the Development of Sports Goods, Sialkot
7. Surgical Industry Support Center, Sialkot
8. Wood Seasoning, Sahiwal
9. Mango Preservation and Processing Facility, Multan
10. Citrus Fruits Preservation and Processing Facility, Sargodh
11. Glass Support Center, Hydrabad
12. Ajrak and Vegetable Dyes Development Center, Halla
13. Light Engineering Support Center, Sukkhar
14. Light Engineering Support Center, Nawabshah
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15. Industrial Support Center for Auto Parts Industry, Karachi
16. Support Center for Mining and Beneficiation of Minerals, Muslim Bagh
17. Support and Training Center for Cutting and Polishing of Precious and Semi Precious stones, Quetta
18. Dates Research, Training and Support Center, Turbat
19. Vegetable Research, Training and Support Center, Khuzdar
20. Engineering Support Center, Gawader
21. Research and Support Center for Apples, Quetta
22. Research and Support Center for Grapes, Mastung
23. Support Center for Marble and Granite Processing, Nowshara
24. Support and Training Center for Cutting and Polishing of Precious and Semi Precious stones, Peshawar
25. Dates Research, Training and Support Center, D. I. Khan
26. Wood Complex, Hazara
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CHAPTER 5
AGRICULTURE
Muhammad Iqbal and Munir Ahmad
Agriculture is the largest income and employment-generating sector of Pakistan’s economy. About two third of the population resides in rural areas and directly or indirectly depend on this sector for their livelihood. The agriculture sector however faces various problems and thus led to high poverty in rural areas. A sustained growth rate of 5 – 6 percent in agriculture is imperative to ensure a rapid growth in national income, macroeconomic stability, improvement in distributive justice, and a reduction in poverty. This can be envisioned by exploiting the unachieved potential of all the sub-sectors of agriculture, diversifying agricultural production towards high value crops, and conserving land and water resources. A higher level of investment in agricultural research and development (R&D) activities supported by favorable policy instruments, human resources development, and necessary physical and institutional infrastructure can prove a catalyst towards achieving enhanced productivity and the desired growth rate.
This study identifies that crops yields on an average farm are lower by 31-75 percent than the yields on progressive farms, while the latter’s productivity is 25-57 percent less than the technology potential realized at the research stations. These unachieved potentials are even higher in case of livestock production, e.g. milk productivity per animal is less by 61-78 percent than the maximum achievable yield.
The major reasons for such gaps are lack of resistance to pests and diseases, low genetic potential, drought and high temperature stress, soil nutrient mining and salinity/water logging, unbalanced and low use of quality inputs and low inputs use efficiency on the one hand, and lack of quality control, low value addition and high post harvest losses on the other. The losses in agricultural output due to salinity/water logging are more than 21 billion rupees per annum, and post harvest losses in fruits and vegetables only are up to 49 billion rupees every year.
The research system is poorly funded, ill equipped, weakly linked with international and national stakeholders, thinly staffed with mostly low capacity and unmotivated scientific manpower, lack autonomy, and generally mismanaged. The present day NARS cannot deliver up to the future expectations without funding at a higher level, essential human resource development, provision of modern laboratories and good library facilities, creation of a nice working environment, and offering the scientists good career opportunities and financial incentives.
A higher level of investment in agricultural research and development (R&D) activities in various priority areas has been identified including: human resource development in agricultural research and extension; use of agricultural biotechnology for development of bio-fertilizers, bio-pesticides, high yielding varieties resistant to biotic and abiotic stresses, and virus free seed production etc; development of hybrids; use of information technology in agricultural extension; conservation of land resources through integrated plant nutrient system, improving saline/sodic lands with gypsum application; enhancing water use efficiency through laser leveling, adoption of water conserving technologies; reduction of post harvest losses through developing varieties with improved shelf lives and improving post harvest handling technologies; improvement of local breeds of buffalo and cow; development of vaccines, improved semen production; improved fodder and rangeland management; use of artificial insemination, strengthening of seed production; development of fish feed and
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improvement of fish seed production; establishment of quality testing labs; and enhanced value added through increased agro processing.
In order to pursue these projects about 575 billion rupees are required during 2005- 20 years, including 88 billion rupees up to 2010, 207 billion rupees 2010-15 and 280 billion rupees during 2015-20. It is envisioned that this investment will generate about 2,368 billion rupees as net benefits. The investment is expected to generate an internal rate of return close to 108 percent.
5.1 INTRODUCTION
Agriculture is the largest income and employment-generating sector of Pakistan’s economy. About two third population of the country resides in rural areas and directly or indirectly depend on agriculture for their livelihood. The sector provides raw materials to the industrial sector and is an important source of demand for its products. Therefore, a higher and sustained growth in agricultural production is imperative for overall development of the economy and poverty reduction in Pakistan. A number of researchers including Naqvi et. al. (1992, 1994) and Mellor (1988) believe that agriculture must maintain a growth rate of more than five percent in order to ensure a rapid growth of national income, attaining macroeconomic stability, effective employment of growing labor force, securing improvement in distributive justice and a reduction in rural poverty in Pakistan.
The important factors that may contribute to a higher agricultural growth include increased cultivated area, enhanced cropping intensity, multiple cropping, augmented use of various agricultural inputs, technological change, and technical efficiency. Various studies show a positive growth in total factor productivity for agriculture in Pakistan. However, the estimates differ widely and range from 0.37 [Kemal et. al (2002)] over the period 1964-2001 to 2.3 [Ali (2000)] for the period 1960-1995 (Annexure 5.I). Chaudhry et. al (1996) estimated a total factor productivity growth of 0.48 for crop sub-sector over the period 1950-1995; growth in aggregated inputs accounted for about 80 percent of the total increase in crop output growth and rest was contributed by improvement in technology.
In Pakistan, the potential for allocating more land and water resources towards agriculture and/or scope of further increase in cropping intensity is limited. Similarly, use of inputs like fertilizers and pesticides cannot be increased beyond certain limits and also because of national health and environmental concerns. Therefore, Pakistan would have to depend more heavily on technological change and improvement of technical efficiency for the desired rapid agricultural growth.
Technological change is the result of research and development (R&D) efforts, while technical efficiency with which new technology is adopted and used more rationally is affected by the flow of information, better infrastructure, availability of funds and quality inputs, and farmers’ managerial capabilities. Empirical evidence shows that R&D through its influence on productivity has been an important source of growth in agricultural production in many of the developed as well as developing countries [Evenson (2002)].
Productivity in most of the sub-sectors of agriculture in Pakistan continues to be rather low relative to the developed and many developing countries with similar resource base. As Pakistan’s economy would be more and more integrated into the world economy it would become increasingly difficult for it to compete in the world market unless higher growth in agricultural productivity is ensured on sustainable basis. This exercise aims at prioritizing research areas in the field of agriculture for funding in short, medium, and the long run for a greater impact on agricultural growth and economic progress of the country. Basic objective is sustainable growth rate of more than 6 percent for agriculture sector up to 2020 for food security and poverty alleviation by:
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• Exploiting the potential of all the sub-sectors of agriculture; • Diversification towards high value crops; and • Environmental enhancement by conservation of land and water resources.
While R&D activities are absolutely important, these must be supported by favorable
policy instruments, human resources development, necessary physical and institutional infrastructure etc. The required supportive actions have also been identified in the study.
Specific objectives of the study are:
a) Assess the present state of technology in agriculture sector of Pakistan;
b) Evaluate the essentials of technology;
c) Prepare a technology vision for agriculture; and
d) Recommend a plan of action.
The study is partitioned into three parts. The first part is devoted to the issues and action plan for agriculture sector of Pakistan. Keeping in view the crucial role that agro-processing and biotechnology can play in future development of country’s agriculture, the issues and action plan regarding these important fields are presented in the second and third part respectively. 5.2. THE PRESENT STATE OF AGRICULTURE IN PAKISTAN:
CROPS SUB-SECTOR Agricultural production is dominated by crop and livestock production, which
respectively accounted for 56.5 and 38.9 percent of the total valued added in agriculture during 2002-03; fisheries and forestry sub-sectors contributed just 3.5 and 1.1 percent respectively. The respective shares of major and minor crops in total value added in agriculture stood at 40.5 and 16 percent. The four major crops namely wheat, rice, cotton, and sugarcane contributed 37 percent to the overall agricultural income and around 9 percent of the GDP. Therefore, performance of these four crops has been crucial for both the agricultural production and overall performance of the economy. Since there have been wide fluctuations in their performance over time, the GDP growth rates have been quite unstable. More diversification in the agriculture sector is crucial both for stability of agricultural income as well as GDP. The minor crops include oilseeds, pulses, vegetables, fruits, and other horticultural crops. Though the contribution of minor crops has been small relative to major crops, they have the highest growth potential particularly the vegetables, fruits, and flowers along with the livestock and fisheries sub-sectors.
The crop sub-sector is dominated by production of major crops, which account for nearly 70 percent of the total income generated in crops. Major crops such as wheat, rice, cotton, and sugarcane account for 90 percent of the value added in major crops.
5.2.1 Wheat
Wheat occupies more than 70 percent of the cropped area during rabi season and holds a central position in the economy by contributing 12.5 percent to the value added in agriculture and 2.9 percent to GDP. Over 70 percent of the total wheat production comes from the Punjab province. Development of dwarf, high input response, and disease resistant high yielding wheat varieties and adoption played a significant role in growth of wheat production in Pakistan. Whereas more than 80 wheat varieties have been released since 1965, only 25 have been adopted on a commercial scale [Farooq and Iqbal (2000)]. Mono-variety culture has prevailed on majority of the wheat farms which is quite risky; Inqalab-91 is the most dominant wheat variety for over a
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decade and there is evidence that the variety is becoming susceptible to yellow rust. The outbreak of rust on a wide spread variety would result in huge output losses.
Infestation of grassy and broad leaf weeds in wheat is a serious problem adversely affecting yield. Incidence of aphids in wheat crop is a new problem noticed especially in cotton belt and bordering areas. A major proportion of wheat acreage follows mainly rice and cotton crops and to a lesser extent sugarcane. The late harvesting of these crops often result in delays for wheat sowing. It is maintained that wheat planting after 20th November may cause yield loss at the rate of 1 percent per day [Randhawa et al (1979), and Hobbs et al (1988)].
The potential wheat yield achieved at the research stations of Pakistan lags behind those of the developed and many developing countries. The future research should focus on short duration, salt and heat tolerant, and disease resistant wheat varieties rich in nutrition. Moreover, development of early maturing varieties of rice and cotton should also be emphasized. 5.2.2 Cotton
Cotton is the most important fiber crop in Pakistan, providing a major source of foreign exchange earnings and occupies the second largest area (after wheat). Approximately 70 percent of the cotton growing area is in the Punjab, while most of the remainder is in Sindh. The incidence of cotton leaf curl virus (CLCV), insects, and diseases is the major factor constraining cotton yield in Pakistan. The number of chemical applications on cotton crop was at the level of zero to 2 sprays during 1988 and this number has passed beyond 11 sprays in recent years. The increase in number of applications, however, is not accompanied with an increase in yield. It is clear that cotton varieties in field during the past several years offered little resistance against insects and diseases (Khan et al, 2002).
The heavy use of chemical on cotton has substantially increased cost of production and thus limiting our competitiveness in the international market. The development and adoption of Bt cotton varieties in competing countries have resulted in reduced use of chemicals thus reducing costs and increasing yields. Therefore, the country would be facing very tough competition in the international market. Our cotton gets lower prices due to contamination and smaller staple length. The heavy use of chemicals on cotton and the residue effect on subsequent crops has implication for national health, environment, and acceptability of produce by the international consumers. The non-availability of quality seed and pesticides is also a serious problem limiting cotton yields. Investment in R&D needs to be made for development of disease and insect resistant high yielding varieties of cotton using techniques of modern biotechnology. Moreover, use of integrated pest management technology is important for reducing cost and production of clean cotton.
5.2.3 Sugarcane
Sugarcane is an important cash crop. Punjab is the main producer, followed by Sindh and NWFP. The area under sugarcane increased from 0.44 to about 1 million hectares and sugarcane production has increased from 14.35 million metric tons to 48.04 million metric tons during the same period with an average growth rate of over 3 percent per annum. Sugarcane yield has increased from 32.3 metric tons in 1961 to 48.1 metric tons per hectare during the year 2001-02, showing an average annual growth rate of around 1 percent.
Planting of unapproved sugarcane varieties (CO 1148) on significant area, low sugar contents, and incidence of insects and pests are the major factors constraining sugarcane yield in Pakistan. Sugarcane uses scarce water more intensively and occupies land for the complete year. Therefore, the country does not have at present comparative advantage in production of sugarcane. By developing high yielding varieties with greater sucrose contents and promoting
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sugarcane cultivation in areas that are more suitable for its production, and effectively controlling insects, pests, and diseases, sugarcane production may be competitive.
5.2.4 Rice
Basmati rice is an aromatic traditional variety and a high valued export item accounting for about 35 percent of the total rice area. About 97 percent of the total area under basmati lies in Punjab. Yield of basmati rice increased from 1011 to 1479 kilograms per hectare, i.e., about 1 percent average annual growth rate during the period 1961 to 2001. Pakistan does not have comparative advantage in growing Irri rice. Therefore, area under Irri varieties should be reduced to save water. The major constraints to increasing paddy (both basmati as well as coarse varieties) yield include inadequate plant population, low availability of quality seed, inadequate and unbalanced use of fertilizers, delayed or too early transplanting, increase in the incidence of insect pests and diseases and post harvest losses, etc. The development of hybrid rice varieties in other countries would pose a severe competition in future. The traditional/conventional breeding to evolve pest resistant and improved quality paddy varieties should be continued. The other research areas include development of paddy planting methods to achieve optimal plant population, harvesting and post harvest technologies, and balanced use of micro and macro (fertilizer) nutrients on paddy. The new research areas include developments of hybrid and transgenic paddy varieties. Transplanting of paddy at optimal time and improvement in processing technologies are crucial for enhancement of rice quality.
5.2.5 Maize
Maize acreage, yield and production showed upward trends during the period 1961-2000. More than half of the maize crop is grown in NWFP and most of the rest is produced in Punjab. Presently, cross-pollinated as well as hybrid maize varieties are being grown in the country. In areas where underground water of better quality is available in abundance, hybrid maize can be grown throughout the year. However, maize sown in spring gives better yields and in certain areas it is replacing wheat. The maize marketed by the farmers usually contains high moisture than the recommended level adversely affecting quality of maize and poor quality of processed products of maize (e.g. feed). Dissemination of hybrid maize seed (with a yield potential of over 10 tons per hectare), promotion of balanced fertilization, plant protection measures and good crop husbandry techniques can revolutionize maize production in the country. Processing of maize for food products, corn oil extraction, and use in livestock and poultry feed industry need to be promoted.
5.2.6 Oilseeds
The consumption of edible oil in Pakistan has risen from 0.3 million to 1.95 million tons during the last two decades. Local production accounts for 29 percent of the domestic requirement while the remaining 71 percent of the domestic requirement are met through imports. The import bill for edible oil, which was Rs. 2.3 billion in 1979-80, increased to Rs 39.3 billion in 2002-03. Cottonseed and rapeseed and mustard are conventional oilseed crops, while sunflower, soybean, and safflower were introduced in the mid sixties. Cottonseed and rapeseed together contribute over 71 percent of the total domestic edible oil production. Sunflower, canola, soybean, safflower and corn together contribute only 12 percent to the total edible oil production in the country.
Constraints to increased production of oilseed crops in the country include adjustment problems in the cropping pattern, non-availability of technological packages for different oilseed crops, low yield, high cost of production especially the hybrid seeds, and eroding profitability of the farmers. Another factor contributing to low oil production in the country is low recovery of
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oil due to lack of use of solvent extraction technology. Future efforts should focus at the development and local production of hybrid seeds for non-traditional oilseed locally. 5.2.7 Research and Infrastructure Projects
The research projects and the essential infrastructure required for higher growth of field crops sub-sector are listed in the following.
5.2.7.1 Research Areas
1. Development of hybrid seed for rice, canola, sunflower, fodders, and wheat.
2. Development of Bt cotton, Bt rice, Bt chickpea, and Bt oilseed
3. Testing and promotion of technologies for establishment of optimal plant population in paddy
4. Improvement of post harvest handling technologies for field crops
5. Development of early maturing and disease resistant varieties of rice and cotton
6. Development of heat and salt tolerant varieties of wheat
7. Development of disease resistant high yielding sugarcane varieties with high sucrose contents
8. Production technology of medicinal plants
9. Improvement of existing and development of new cheap agricultural machinery
5.2.7.2 Infrastructure and Technology Areas
1. Investment in storage facilities in the private sector through incentives for investment in storage capacity.
2. Establishing network of labs for analysis of chemical and toxic residues and quality of agricultural produce with ISO accredited certificate.
3. Modernization of processing of rice and other agro based processing
4. Discouraging cultivation of non-approved varieties [Basmati-386 (paddy) and CO1148 (sugarcane)]
5. Zoning of basmati/sugarcane cultivation to high yield/high quality rice areas and to high yield/high sugar content sugarcane regions
6. Ensuring timely availability of quality inputs including fertilizers and pesticides at convenient places and competitive pr ices
7. Cross subsidy on phosphatic fertilizers to promote balanced use of fertilizer nutrients
8. Production and distribution of quality seeds
9. Commercialization of available hybrid seed technology
10. Accessibility to institutional credit for production as well as marketing
11. Strengthening of agricultural education, research, and extension
12. Linkages of agricultural education, research, and extension
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5.2.8 Horticultural Crops
The main fruits produced in Pakistan are citrus, mango, dates, guava and apples which account for over 75 percent of the total annual production of about 6 million tons. Similarly, vegetables like potatoes, chilies, onions and tomatoes constitute over 70 percent of the production of 5 million tons. The annual fruit production in 1960 was not more than 250 thousand metric tons which increased significantly by the year 2002-03 to 5.7 million metric tons (about 23-fold increase). Similarly, vegetables production during 1960 was about 0.64 million metric tons which increased to more than 5 million metric tons by the year 2002.
Out of more than $ 70 billion international trade of fruits and vegetables, Pakistan’s share is merely $ 120 million. During recent years, another important horticultural sector like ornamentals and nursery raising has emerged in which Pakistan’s share is negligible. The horticultural commodities presently being exported are fetching much less price than that to many other countries of the world. For example, Pakistani mangoes are exported at the rate of $ 158 per ton while the same is exported at the rates of $ 685, 875, 830, 500 and 586, etc. per tonne by Mexico, Philippine, Brazil, India and Thailand, respectively. Similarly, per ton value of Pakistani dates is $ 430 while it is 2251, 2000, 1350 and 5000 dollars per tonne for Tunisia, Libya, China and Italy, respectively.
Low yields and inferior quality are frequent problems in horticultural crops. Non- standardized nursery plant, non-availability of disease free seeds, poor management and cultural practices and high post harvest losses are the main causes for it. The post harvest losses are reported as high as 12-40 percent causing a loss of about Rs.49 billion every year. Our horticultural produces mostly have short shelf lives and the quality usually falls short of being suitable for processing. Inadequate grading, poor quality packaging, and limited cold storage facilities are the other constraints to export of horticultural products. Moreover, only a small proportion of the total production of vegetables and fruits are processed and major part is consumed or exported in raw/fresh form. Increased processing would enhance value added and improve employment. Implementation of rule for certification of fruit plants and registration of private fruit nurseries are essential for improving and establishment of uniform and high quality and disease free orchards. The future research efforts should aim at development of insects and disease resistant hybrid seed for vegetables and flowers having longer shelf lives and suitable for processing.
A significant portion of the total production in case of certain horticultural crops is produced organically and proper certification for such produce can earn us premium prices in the international markets. The establishment of proper certification facilities and development of technologies for organic food production would help in raising Pakistan’s exports of agricultural products. The research projects and the essential infrastructure required for higher growth of horticultural crops sub-sector are listed below 5.2.8.1 Research Areas
1. Hybrid seed development for vegetable and flowers
2. Development of seedless “Kinno”
3. Improving shelf life and desirable quality of mango and other important horticultural crops
4. Introduction of new horticultural crops and plants such as avocado, oil palm, and olive etc
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5. Improvement/development of post harvest handling technologies for important horticultural crops
6. Organic farming for export
7. Development of Bt tomatoes, Bt potatoes, Bt. cucumber, and Bt. Melons
5.2.8.2 Infrastructure and Technology Areas
1. Cold storage at the major production areas, consumer centers and export points
2. Extension for horticultural crops
3. Refrigerated transport facilities
4. Promotion of cleaning, grading, and packaging facilities
5. Mechanism for certification of fruit plants
6. Establishment of irradiation plants
5.2.9 General Issues Related to Crop Production
5.2.9.1 Unachieved Yield Potential
The national average yields of various crops are far below their potential yields realized at the progressive farms and that demonstrated at research stations (Table 5.1 and 5.2). Moreover, research potential yields are lower than the potential demonstrated in many of the developed and developing countries (Table 5.3). Evenson (2002) discusses four yield levels and three yield gaps associated with them. The first level is actually realized yield (A) on the average farmer’s fields. The second is the “best practice” (BP) yield, which can be realized using the best available technology. It is possible that some farmers obtain best practice yields but the average farmer does not. The third yield level is the “research potential” (RP) yield, i.e., it is the hypothetical best practice yield that would be expected to be attained as a result of a successful applied research program directed toward this crop. The fourth is “science potential” (SP) yield. This is also a hypothetical yield. It is the research potential yield attainable if new scientific discoveries (e.g., in biotechnology) are utilized in applied research programs.
Associated with these four yields levels three “gaps” are defined. Firstly, extension gap, the difference between best practice and average yields. The extension programs are designed to close this gap. Secondly, research gap, the difference between research potential yields and the best practice yields. Applied research programs, if successful, will close this gap (and will thus open up the extension gap). Thirdly, science gap, the difference between science potential and the research potential yields. For agricultural development we need to continuously keep on bridging all the three gaps.
In Pakistan all the three gaps i.e. “extension gap”, “research gap” and “science gap are quite wide. Due to general inefficiency of our agricultural production system, the national average yields of most of the agricultural crops are far below the demonstrated potentials. The extension and research gaps range from 31 to 75 and 25 to 57 percent respectively. The national level yields of selected crops are 50 to 83 percent lower than the highest averages attained in other countries of the world. By reducing these yield gaps through effective extension services; improving access to institutional credit, markets, and health facilities; funding R&D efforts adequately; and incorporating new scientific discoveries. For example, we can achieve a much higher growth rate in agriculture without any increase in the area under cultivation through biotechnology.
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Table 5.1: The “Extension Gaps” for Various Agricultural Commodities
Extension Gap Commodity Progressive Farms’ Yield (MT/Ha)
National Average 2000-01 (MT/Ha)
MT/Ha Percent
Wheat 4.6 2.3 2.3 50.0 Cotton 2.6 1.8 0.8 30.8 Sugarcane: Sindh Punjab
200 130
60 40
140 90
70.0 69.0
Maize 6.9 1.7 5.2 75.4 Rice 3.8 2.0 1.8 47.4 Rapeseed/ Mustard 1.5 0.8 0.7 46.7 Cow Milk (MT/Year) 3.1 1.2 1.9 61.3 Source: PCST (2003a); Iqbal and Ahmad (1999)
Table 5.2: The “Research Gaps” for Various Agricultural Commodities Research Gap Commodity Potential Yield Progressive
Farms’ Yield MT/Ha Percent Wheat 6.8 4.6 2.2 32.4 Cotton 4.3 2.6 1.7 39.5 Sugarcane: Sindh Punjab
300 300
200 130
100 170
33.3 56.7
Maize 9.2 6.9 2.3 25.0 Rice 5.2 3.8 1.4 26.9 Rapeseed/ Mustard 3.4 1.5 1.9 55.9 Cow Milk (MT/Year) 6.5 3.1* 3.4 52.3 Source: PCST (2003a); Iqbal and Ahmad (1999) * Sahiwal Breed Potential
Table 5.3: Gap from World’s Highest Average Yield Gap from the Highest Commodity Highest Avg. Yield in the
World (MT/Ha) National Average 2000-01 (MT/Ha) MT/Ha Percent
Wheat 7.5 (France) 2.3 5.2 69.3 Cotton 4.0 (China) 1.8 2.2 55.0 Sugarcane: Sindh Punjab
120 (Egypt) 60.0 40.0
60 80
50.0 66.7
Maize 9.9 (France) 1.7 8.2 82.8 Rice 7.4 (USA) 2.0 5.4 73.0 Cow Milk (MT/Year) 5.5 (USA) 1.2 4.3 78.2
Source: Pakistan (2003a)
5.2.9.2 Degradation of Land Resources
The growth in agricultural output is attributed to development of irrigation infrastructure, increased cultivated area, increased intensity of land use, multiple cropping, and increased use of various inputs and technologies. Out of 79.61 million hectares of geographical area of Pakistan, 22.27 million hectares were cultivated during 2001-02 as compared to 14.99 million hectares in 1949-50 (Table 5.4). Considering the extent and severity of different soil related constraints, 26 percent of the arable land is classified as very good, 35 percent good, 24 percent moderate, and 15 percent as marginal [PCST (2003a)].
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Table 5.4: Distribution of Land Use in Pakistan
Particulars 1949-50 (mha)
Percentage of Geographical area
2001-02 (mha)
Percentage of Geographical area
Geographical Area 79.61 100.00 79.61 100.00 Cultivated Area 14.99 26.33 22.27 27.97 Culturable Waste 9.32 11.12 8.95 11.24 Cropped Area 12.21 27.41 22.12 27.79 Forest Area 1.37 4.35 3.80 4.77
The cultivated area increased by about 48.6 percent over a period of 52 years at a rate of
roughly less than one percent (0.76 %). A major proportion (82 %) of the cultivated area is irrigated, while the rest (18 %) is rainfed. The cultivable wasteland of 8.95 million hectares seems to offer a good possibility of crop production if exploited in future through enhanced water availability. Given the limited amount of unexploited water resources coupled with political complications and heavy investments required for development of country’s water resources, only a slow and partial exploitation of wasteland is possible.
The cropped area increased from 12.21 million hectares in 1949-50 to 22.12 million hectares in 2001-02, an increase of 81.2 percent at a growth rate of about one percent per annum. The national average cropping intensity increased from about 122 percent in 1980 to 142 percent in 2000 (see Agriculture Census). The provincial average cropping intensity stood at 154, 130, 142 and 78 percent respectively in Punjab, Sindh, NWFP, and Balochistan respectively (Annexure 5.II). The cropping intensities increased over time in all the provinces except Balochistan (where it was highest in 1990) but are declining with increase in farm sizes. The national average cropping intensity on marginal and small farms was 162 and 151 percent respectively during 2000. The average cropping intensity in irrigated area is expected to be even higher and in certain areas may be in the vicinity of 200 percent. This implies that the pressure on land resources is mounting overtime and especially on small and marginal farms (5 hectares or less).
Such a high cropping intensity along with low use of farmyard manure and unbalanced use of chemical fertilizers have serious implications for soil health and especially for sustainability of marginal and small farms. Keeping this in view, further increase in agricultural production through enhancing cropping intensity has a slim chance.
Most of the soils in Pakistan are deficient in macro nutrients like nitrogen and phosphorus. Increasing deficiencies of potassium and micro nutrients like zinc, boron and iron etc have also been noted. The imbalanced use of fertilizer nutrients, lack of its integration with organic sources along with poor management are the main factors affecting fertilizer use efficiency. The other factors like salinity/sodicity, water logging, and soil moister stress also affect the fertilizer use efficiency adversely but to a smaller extent. Most of the farmers lack information regarding soils nutrients of their farm lands and with every harvest more nutrients are being mined out than being added resulting in negative balance [Hamid and Ahmad (2001)]. The strategy for a higher agricultural growth on sustainable basis must address the issue of mismanagement of soil nutrients along with other complementary measures like cross subsidy on DAP fertilizers to make it cheaper relative to nitrogenous fertilizers (urea).
The other important issues that affect productiv ity of land resources in Pakistan include water logging, salinity/sodicity, and soil erosion. Seepage from canals, distributaries, watercourses and unleveled fields and poor drainage has created the problems of waterlogging and salinity in the irrigated areas of the Indus plains. Presently, almost 30 percent of the irrigation water at the farm gate is derived from groundwater, whose quality is far inferior to canal water. Out of over 562,000 private and 16,000 public tubewells in Pakistan, 70 percent are pumping brackish water [PCST (2003b)]. Also the salinity in the root zone is expected to increase with the
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application of marginal quality groundwater. According to recent estimates, approximately 16 percent (2.4 million hectares) of irrigated land is underlain by watertable that is within 5 feet of the surface and is thus classified as disaster area. Out of this only 0.6 million hectares (1.6 million acres) are under various Salinity Control and Reclamation Projects (SCARPs).
As much as 14 percent of the land is affected by the surface salinity and the percentage, increases to approximately 20 percent if the salinity in the soil profile (in depth) is also considered. There are 6.17 million hectares of lands affected with salinity and sodicity. Out of this about 3.37 million hectares are uncultivated and are severely affected with salinity/sodicity. About 2.80 million hectares of saline/saline-sodic lands are cultivated out of which 0.97 million hectares are severely saline/saline-sodic and about 1.83 million hectares are affected with slight to moderate salinity/sodicity (Table 5.5). Assuming the rates of 20 and 35 percent lower productivity respectively on cultivated soils affected with slight and moderate salinity/sodicity, it is estimated that nation is losing about 21.5 billion rupees each year. Being under the canal commands, these lands offer very good potential for agricultural production if they are reclaimed through provision of drainage facilities and use of chemical and biological amendments.
Table 5.5: Extent of Saline/Sodic Soils in Pakistan and Associated Productivity Losses Slightly
affected Moderately affected
Severely affected Total
Cultivated (000 Ha) 598.7 1229.8 975.3 2803.8 Uncultivated (000 Ha) - - 3369.7 3369.7 Total land affected 598.7 1229.8 4345.0 6173.5 Rate of agricultural GDP loss @ 20 % @ 35 % Cultivated: @ 60 %
Uncultivated@ 100 %
GDP loss from cultivated area (million Rs)
4679.4 16821.0 22868.5 44368.8
GDP loss from uncultivated (million Rs)
-
- 131686.0 131686.0
Total GDP loss (million Rs) 4679.4 16821.0 154554.5 176054.8
A significant amount of arable land resources are being lost due to rapid expanding urban centers and dumping of urban solid waste and untreated toxic industrial waste on arable lands. There is an urgent need to devise and implement a proper land use policy to arrest the rapid loss of fertile arable lands.
Soil erosion is relatively a more serious problem in rainfed and hilly areas. Rapid deforestation and increasing crop production along steep hillsides result in heavy losses of soil and its nutrients. The problem is more serious where soil depth is shallow. The chemical runoff is polluting the water and soil erosion is creating silting problem in water reservoirs and canals.
5.2.9.3 Inefficient Use of Water Resources
Pakistan’s agriculture is mostly dependent on irrigation from surface and ground water resources. The surface water supplies to Indus plain include rainfall and flows from Indus river system. According to recent estimates, the Indus river system accounts for 60 percent of the annual water supply while rainfall accounts for only 15 percent of the total water requirements for crop production (Table 5.6).
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Table 5.6: Average annual water supplies for irrigation of the Indus Plain
Source Volume (billion cubic meter)
Volume (million acre feet)
Proportion (%)
Rainfall 31.98 26 14.8 Diversion to canal irrigation systems 129.15 105 59.6 Groundwater 55.35 45 25.6 Total 216.48 176 100
Source: PCST (2003a)
The surface irrigation system relies on water availability in the river. Of the total water available for irrigation annually about 84 percent flows during kharif season and only 16 percent flows during rabi season [IWMI (1999)]. Ground water development has played an important role in agricultural growth in Pakistan. Ground water supplies account for about 30 percent of the annual water supplies for agricultural production. Three million hectares are currently being irrigated by tubewells while about 70 percent of tubewells are pumping out hazardous irrigation water.
Originally, the system was designed to fulfill irrigation water requirement for 75 percent cropping intensity, which has now exceeded 142 percent (Annexure 5.II). The water losses due to poor maintenance of the irrigation system, seepage, evaporation, and inefficient use of water at the farm level are as high as 60 percent. The canal and watercourse conveyance losses respectively account for 33 and 50 percent of the total water losses. The overall irrigation efficiency is very low compared to other countries, e.g. Israel has quite high efficiency under desert conditions.
The growth rate in overall farm gate water availability has declined after 1980 (Table 5.7). The capacity of existing storage reservoirs is reducing due to sedimentation. According to the historical records, the 27 years average rim-station inflow of water was 138.7 million acre feet (MAF). The average water outflow to sea amounted to 36 MAF. A certain amount of water is essential to flow continuously into the sea to preserve ecology of deltaic area and prevent seawater intrusion into inland fresh water areas. However, exact quantification of this amount of water need to be determined by conducting impartial comprehensive study. There is a need to conserve every drop of water in excess of the optimal outflow to the sea by developing required storage capacity in future. The main problems of water sector include reduced water availability, water losses both due to inefficient use at the farms and institutional problems, rigid warabandi and poor performance of public sector tubewells [MINFAL, PARC & FAO (2000)].
Table 5.7: Water Availability at the Farm Gate (in million acre feet)
Decade Surface water Change (%) Ground water Change (%) Total Change (%) 1964-65 62.94 9.25 72.19 1969-70 59.51 -5.45 15.59 68.54 75.10 4.03 1974-75 51.86 -12.85 25.16 61.39 77.02 2.56 1979-80 61.64 18.86 31.00 23.21 92.64 20.28 1984-85 65.21 5.79 38.15 23.06 103.36 11.57 1989-90 74.16 13.72 42.98 12.66 117.14 13.33 1994-95 81.23 9.53 48.42 12.66 129.65 10.68 1999-00 83.37 2.63 49.91 3.08 133.28 2.80
Source: Pakistan 2003 and Previous Issues
A national water quality management program to monitor water quality and enforce standards on effluent discharge into rivers and streams is extremely important. Sustainable water use requires an integrated approach involving conjunctive use of surface and ground water with appropriate price mechanisms reflecting scarcity of resource. The research projects regarding land and water resources are listed below.
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5.2.9.4 Research Areas
1. Testing and promotion of land and water resource conserving technologies (Zero-tillage, ridge and permanent raised bed cultivation, trickle/sprinkler/rain gun irrigation, and moister conserving technologies).
2. Integrated plant nutrition system (IPNS) for field and horticultural crops
3. Promotion of gypsum application for improving saline/sodic soils and tubewell water
4. Developing energy saving and cheep rain guns, sprinklers, trickle irrigation equipment
5.2.9.5 Infrastructure and Technology Areas
1. Enhancing water storage capacity
2. Improving irrigation efficiency through lining of canals especially in the more porous soils with brackish groundwater and all the water channels
3. Promotion of precise land leveling through subsidized renting of laser machines, credit for purchase of laser levelers
4. Promotion of water and land conserving technologies
5. Incentives like credit, duty free import of machines, technical assistance and training etc. for manufacturers of water saving irrigation equipment
6. Pricing of water based on volumetric measures and reflecting scarcity of resource 5.2.9.6 High Post Harvest Losses
The use of poor harvesting and post harvesting technologies for handling agricultural production result in significant income losses in terms of quantity lost as well as reduction in value due to lower prices on account of quality fading. The post harvest losses in different fruits range from 12 to 40 percent (Table 5.8). In most of the fruits losses are high due to external and internal injuries occurred during harvest. The fruits are usually packed in jute sacks, used fertilizer bags, and in wooden crates. Due to extreme heat, high humidity, and improper packaging conditions, produce quality deteriorates rapidly resulting in high losses. Most of the losses occur during transportation and marketing especially in case of banana, jujube, and mango. Lack of adequate storage and cold storage facilities in wholesale markets is the major factor causing high market level losses.
Table 5.8: Estimated Post Harvest Losses for Different Fruits in Sindh (Percent)
Horticultural Crop Harvesting Packing Transport Ripening Marketing Total Mango 10 3 2 5 10 30 Banana 2 5 10 2 20 39 Jujube 10 5 10 5 10 40 Chiku 10 5 5 5 5 30 Guava 15 3 2 - 5 25 Papaya 5 2 - 5 5 17 Dates 5 5 - - 2 12
Source: Bukhari (2000)
The post harvest losses in fruits are estimated at Rs. 31 billion and in vegetables Rs. 18 billion per annum [MINFAL (2001)]. The value of wasted quantity in case of just three fruits
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(mango, banana, and dates) amounts to over 4 billion rupees per year. The shelf life and desired quality of horticultural crops need to be improved to meet the international standards and preference of the foreign consumers especially for potential export crops. Take the example of kinno, we have varieties which are best in taste, however, the consumers in foreign countries prefer seedless citrus.
A combination of research efforts for evolving suitable varieties and developing improved harvesting, transporting, storage, and packaging technologies in this regard would save us a significant amount of otherwise lost agricultural income. The export of high quality fruits and vegetables needs to be supported by cold chain infrastructure and reefer containers.
5.2.9.7 Low Use and Unbalanced Doze of Fertilizer
The present average consumption of fertilizers in Pakistan is about 138 kilograms per cultivated hectare, which is higher than India, USA, and USSR, but it is lower than many developing and developed countries like Egypt, France, Japan, Germany, and Netherlands. The historical data on fertilizer consumption depicts that per hectare fertilizer use declined in Netherlands, Germany, and France respectively from 805, 479, 312 Kgs in 1970-71 to 470, 232 and 225 Kgs per hectare in 2000-01 (Annexure 5.III). In Pakistan, probably at this stage quantity of fertilizer nutrients used is relatively less important (at least in certain area and/or on certain crops) than the balanced use of nutrients. Presently, the use of fertilizer nutrients is in the N: P ratio of 3.4:1 as against the recommended ratio of 2:1. Significant increase in crop output can be achieved by moving fertilizer applications towards a more balanced doze.
Relatively high cost of phosphatic fertilizers is the main driving force for the imbalance use of fertilizer nutrients. Government may exercise cross subsidy to encourage a move towards the balanced doze. Many soils are also deficient in micronutrients due to continuous mining of these nutrients resulting from continuous same crop rotations. It is recommended that testing of farm soils and tubewell water should be made mandatory and the testing results be used for determination of proper nutrient mix and water treatment. 5.2.9.8 Use of Pesticides and Increasing Production Costs
The use of biocides and chemical fertilizers per cropped hectare has declined in a number of countries and a few of them are returning to organic farming. However, in Pakistan the use of chemicals and fertilizer nutrients are increasing and some of the chemicals being used are banned in other countries. The residual effect of pesticides applied on crops appears in the food chain. The analysis of samples of food and animal feed products produced in high pesticide use zones showed that a high proportion of these commodities contain pesticide residue beyond the maximum residue limits set for marketing and consumption [Khan et. al. (2002)]. Excessive use of chemicals is not only costly but the national health, environment, and ability of the country to export agricultural products in future are also at risk. The use of Integrated Pest Management (IPM) approach and techniques of biotechnology can reduce production costs and enhance quality of the products. There is also a need of establishing an effective network of chemical and toxic residues and quality testing labs in Pakistan. The use of biotechnology techniques to develop disease resistant varieties and integrated pest management technologies may reduce production costs and increase yields of various crops.
5.2.9.9 Accessibility to Quality Inputs and Services
Most of the farmers in Pakistan, especially those operating marginal and small farms, generally lack access to quality inputs and extension services and generally have to pay higher prices. Improvement in access of the farmer to these inputs and services would enhance
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agricultural production. Presently, institutional credit covers only 15 percent of the farmers and meets 30 percent of the total credit requirements. The formal financial institutions advanced an agricultural credit of Rs. 44 billion against a total credit requirement of Rs. 146 billion during the last year with the current year’s target for loan disbursement fixed at 100 billion rupee. Moreover, the institutional lending is skewed towards large loans and farmers. The coverage needs to be increased with main focus on farmers operating farms of size 12.5 acres or less.
5.2.9.10 Production and Distribution of Certified Seed
Seed production and distribution remained mostly in the public sector that mainly focused on major crops and here too had a limited capacity. Since 1994 role of private seed companies has significantly increased as a result of more liberal policy of the government. Presently 376 seed companies including four public sector seed agencies and five multinationals are involved in the seed business in Pakistan. The problem of seed adulteration, insignificant difference in yield performance of certified seed and farmers’ own seed, and to some extent higher cost of certified seed are the main reasons that the farm level use of certified seed and seed replacement rate remained low. The Seed Act 1976 restricts production of pre basic and basic seed by the private sector while the capacity of production of pre basic and basic seed at the public sector agricultural research institutions is limited due to lack of funds, technical staff, seed processing plants, and seed storage facilities. There is a need to either amend the Seed Act 1976 incorporating changes that allow the private sector to start production of pre basic and basic seed or enhancing the capacity of research institutions to produce the pre basic and basic seed in sufficient quantities to meet the full requirement of the public and private sector organizations involved in seed production. We prefer the latter under which foundation seed production be continued at research stations with an effective private-public partnership where basic seed and technical guidance is provided by the research institutions and Federal Seed Certification and Registration (FSC&R) Department and actual seed multiplication by the private as well as public sector organizations with the following alternative arrangements:
a) On quantity of certified seed marketed by the private sector royalty or seed cess be charged by research institutions with a greater autonomy to use this money for seed production purposes and research; or
b) Entering into a buyback contract with private companies for purchase of agreed quantity of seed of a specified quality of particular variety at a pre-settled price.
Presently, seed multiplication is mostly confined to few varieties of a small number of major crops. Certified seed for a wider range of varieties and other crops (major and minor) especially the fodders, oilseeds, and vegetables need to be produced and distributed. Moreover, the country lacks capacity in production of hybrid seed and strengthening of research efforts for development and commercialization of hybrid seeds varieties is needed. To start with hybrid seed for canola, sunflower, fodders, vegetables, flowers, rice, and wheat may be developed.
5.2.9.11 Government Interventions in Agricultural Markets
Heavy intervention by the government in agricultural markets did not let market forces to play their role and it failed to provide proper signals to the producers and incentive for private investors. As a result private sector investment in marketing infrastructure like storage and cold storage etc. remained limited and that too mostly confined to Punjab. The producers of crops like wheat, basmati rice, and cotton etc. were mostly offered lower than the world prices.
5.2.9.12 Declining Average Farm Size
The average size of farm reduced from 5.28 hectares in 1972 to 3.1 hectares in 2000 and the declining trend was observed in all the provinces after 1972 (Table 5.9). According to Agricultural
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Census 2000, farms of size 2 hectares or less (hereafter marginal farms) constitute about 58 percent of the total farms and operate only 16 percent of the total farm area whereas 5 percent of farms (of large size with farm area greater than 10 hectares) operated 37 percent of the total area (Table 5.10). The division of land as a result of law of inheritance is major factor resulting in reduced size of holdings. Thus increased numbers of farms are being operated as uneconomic holdings, which cannot provide acceptable levels of living to a large chunk of farming community. The farms of very large size may also be inefficient. Therefore, there is an urgent need to conduct studies determining optimal farm size and optimal cropping intensity in various agro-ecological regions of the country and to provide required incentives so that majority of farms move towards the optimal size.
Table 5.9: Average Farm Size in Pakistan
(in hectares) Years Punjab Sindh NWFP Balochistan Pakistan 1960 3.55 5.94 3.28 9.96 4.07 1972 5.29 5.12 3.69 10.16 5.28 1980 4.75 4.69 3.14 7.80 4.68 1990 3.71 4.34 2.21 9.63 3.78 2000 2.91 4.04 1.67 7.83 3.10
Source: Pakistan (2003a and previous issues)
Table 5.10: Percentage of Farm Numbers and Farm Area by Farm Categories in 1999-2000
2 hectares or less 2 to <5 hectares 5 to <10 hectares Above 10 hectares Census year % farms % area % farms % area % farms % area % farms % area
1980 34 7 40 27 17 25 9 41 1990 47 12 34 28 12 22 7 40 2000 58 16 28 28 9 19 5 37
Source: Pakistan (2003a)
5.2.9.13 Status of Agricultural Research in Pakistan
Pakistan has a sizeable national agricultural research system (NARS) consisting of federal as well as provincial research institutions. Overall, there are 74 research establishments at the federal level and 106 research institutions/agricultural research stations at provincial level [PARC (1996)]. Each province has its own commodity-based/multidisciplinary agricultural research institutes/research stations and substations, covering crops, livestock, forestry, and, in some cases, fisheries. There are 63 research establishments in Punjab, 22 in Sindh, 15 in NWFP and 10 in Balochistan [MINFAL, PARC & FAO (2000)]. The provinces have also established mono-crop institutes concentrating on specific crops.
All the provinces except Balochistan have agricultural universities where applied and basic research is a vital part of their academic activities. These universities are financed by the federal government through the Higher Education Commission (HEC) but are under the administrative control of the provincial governments.
The indicators of research staff and research funding sufficiency include ratio of agricultural scientists to population, percentage of Ph. Ds in total scientific manpower, per scientist funding, and agricultural research expenditures as percentage of agricultural GDP. In Pakistan agricultural research is poorly staffed and under funded in all the above senses. The proportion of agricultural scientists with Ph. D degree is only 10 percent in Pakistan, which is low compared to other developed and developing countries. The limited number of highly qualified scientists is not evenly distributed and about 50 percent of the Ph. Ds are located in universities, 33 percent in the federal institutions and the rest of them are in provincial research institutions
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[FAO-GOP (2002)]. This shows a severe lack of qualified manpower in provincial research systems.
In Pakistan, there were 44 agricultural scientists per million people during 1988 as compared to 2360, 1400, and 300 agricultural scientists per million people respectively in USA, UK, and Egypt [John Mellor Associates (1994)]. The number of agro-ecological zones, types of agricultural production systems, and 130 commercial crops that the country’s agricultural research deals with, demands for a much greater number and more qualified scientific staff to be engaged in agricultural R & D activities [PARC (1996)].
The recent number of agricultural scientists and estimates on the level of funding for agricultural research are not readily available. The research expenditures per agricultural scientist in Pakistan were 8.9 thousand US dollars (240 thousand rupees) during 1980 as compared to 56.4, 30.2, and 21.8 thousand dollars per agricultural scientist respectively in Malaysia, Indonesia, and India (Annexure 5.IV). It came down to Rs. 194 thousands per scientist during 1992 in real terms (at 1990 prices).
Research funding level is around 0.2 percent of agricultural GDP as against 1.5 percent recommended by the Pakistan National Commission on Agriculture [Pakistan (1988)]. The ratio of salaries to operating cost is at about 85:15 compared to internationally accepted ratio of 60:40. Most of the budget allocation is meant for research on crops (mainly for the major crops) whereas disproportionately small amounts are allocated to research on livestock, horticultural crops, natural resource management, and fisheries etc. The share of agriculture in total PSDP/ADP declined from 12.78 percent in 1980-81 to as low as 0.13 percent during 2001-02 and at percent is 0.94 (Annexure 5.V). The share of agriculture in total PSDP should be increased to at least 6-8 percent if agricultural production has to be enhanced by a considerable margin.
It is also identified that the research system in Pakistan offers limited career growth opportunities and little financial incentives even to the highly qualified scientists [FAO-GOP (2002)]. Most of the institutions lack access to quality literature and modern lab equipment to undertake quality research. The scientists have inadequate links with the international and national research and educational institutions, entrepreneurs, extension agents, and the farmers. There is rapidly aging profile of agricultural scientists and a continuous brain drain from the system. The science gap is widening due to fast moving scientific development internationally. The present national research system is ill-equipped to meet even the present challenges not to speak of 2020 and beyond. Pakistan must introduce a more knowledge-intensive agricultural research system that focus on technological innovations at the system level and has access to modern biological sciences.
5.3. LIVESTOCK SUB-SECTOR
Livestock is an important sub-sector of agriculture contributing nearly 39 percent of agricultural value added. Livestock farming contributes substantially to employment and income generation for rural population; 30-35 million rural population is engaged in livestock raising and
Let us not forget that Future of Pakistan Agriculture can be saved only through research. Increased demands for food and other agricultural commodities from shrinking/limited land and water resources can only be met through aggressive research programs and fulfilling R & D needs of the National Agricultural Research Systems in the country and farmer friendly policies.
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30-40 percent of their income comes from selling the livestock products.
Milk, meat, and eggs are the most important products of livestock sub-sector. Even though Pakistan is ranked as 5th largest milk producing country in the world, the average milk yield per animal is still low compared to most of the countries. Through viable strategies of breed improvement and increases in feed supply the yield rise significantly. Meat production increased at the rate of only 2.7 percent during the last decade. The average carcass yield of 185 kg per beef animal remained static over the last 10 years.
Pakistan has good milk yielding local breeds like Nili Ravi (in buffalo) and Sahiwal (in cow) but unfortunately neither the public sector nor the private sector took any significant initiative to improve the breeds through selection (or breeding) and maintain the purity. Resultantly, there in no place from where an investor can get animals of needed breed in desired number. Moreover, a large number of high yield milk animals (mostly in their best stage of production) are transported from rural areas of Punjab to the peri-urban dairy centers working in suburb of large cities within or out side the province. These animals rarely come back and are often culled when run dry. The young stock are slaughtered usually soon after the birth. This practice is a serious threat to the genetic resource of these breeds and need to be given a serious thought.
There are five crucial factors for the development of livestock. These include good genetic potential, availability of feed resources, improved husbandry practices, effective disease control, and fair marketing. Government efforts in all these areas have been half-hearted and fall short of sector’s needs and requirements. The development expenditure in livestock sub-sector has been minimal and has never exceeded 0.5 percent of the total development outlays indicating government’s apathy towards livestock development [Afzal (undated)].
Pakistan is 30 percent deficit in feed resources to sustain the existing livestock population. The animals are underfed and merely body maintenance requirements are being met with little left to be converted into milk or for rapid body growth. Green fodder along with roughages (crops by-products), weeds, and grasses are being fed to the animals with little supplement from home grown grains, kitchen wastes, some concentrates/commercial livestock feed etc. The roughages and fodders have poor nutritional values/digestibility and are rarely treated to improve these factors.
Milk is the major product of the sector and only a small portion of total production is marketed (through a long chain of intermediaries) for urban consumption and commercial processing. Absence of cooling centers, long distances involved, poor road infrastructure, inadequate transport facilities, and high diesel prices result in high transportation cost to the dairy gates and urban centers. The high prices of energy coupled with low capacity utilization and inefficient processing cause high prices of the processed milk and its products relative to the fresh milk or traditionally processed milk products. As a result the demand for processed products is discouraged and at the same time, farmers do not get due price for their produce.
For increasing meat supply, there is a need to develop local beef breed with high meat yield per animal. This will require increase in feed supply through encouragement of commercial production of cattle feed. At present the cattle feed industry is still in the early stage of development. Poultry sector has played an important role in food supply through an annual increase of 12.7 percent increase in meat and 93 percent increase in eggs production during the last decade except few shocks like in 1997 the ban on meal on marriages resulting in very low demand and in the recent years so called outbreak of bird flu.
The major constraints limiting livestock production include shortage of fodder coupled with its poor quality, poor genetic potential, nondescript breeds, long gestation period, long
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calving interval, lack of proven sires, low adoption of artificial insemination and vaccination, low yielding fodder varieties, inadequate health care, poor management practices, inadequate marketing facilities along with consumer price control, heavy initial investment requirements and low returns. The following R&D activities are proposed for the development of livestock sub-sector. 5.3.1 Research Areas
1. Improvement of high yielding local breeds of buffalo (e.g. Nili Ravi, Kundi) and cow (e.g. Sahiwal, Red Sindhi);
2. Development of high yielding multi-cut fodder varieties with rich nutritional value;
3. Strengthening and up gradation of semen production units;
4. Improvement of non descript breeds through artificial insemination;
5. Improved vaccine development for important diseases particularly for Foot and Mouth Disease;
6. Phenotypic and molecular characterization of local breeds;
7. Production of superior germplasm (buffalo, cattle, goat, and sheep);
8. Beef production potential of local breeds;
9. Feedlot fattening for beef and mutton production;
10. Promotion of balanced feed for milk production through demonstration (model farms);
11. Establishment of molecular genetic research programme.
5.3.2 Infrastructure and Technology Areas
1. Establishment of Foot and Mouth Disease vaccine production facility;
2. Effective animal disease surveillance system;
3. Modernization of diagnostic facilities;
4. Provision of diesel and electricity operated chillers at village level;
5. Improvement in marketing facilities including shed, weigh-bridge, water and sale of meat/beef animals on weigh basis;
6. Deregulation of prices of livestock products viz. milk and meat.. 5.4 FISHERIES
Pakistan has been blessed with a vast and extensive expanse of both marine and inland fisheries resources which support a wide variety of fish of nutritional significance and economic value, and possess an immense development potential. Fisheries’ share in GDP although small but contributes substantially to export earnings and employment generation in the coastal areas. During 1999-2000, the total fish production in the country was estimated at 629,600 metric tons, of which, share of inland fisheries was 178,600 metric tons [Pakistan (2003a)]. The exports during the year were 90.4 metric tons. The marine fish harvesting technology and post harvest handling and processing is not up to the international standards. The catches are not properly
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chilled and the quantity and quality of ice used both on board at sea and at the harbors is inadequate. Moreover, inadequate supplies of fresh water at the harbors and use of unclean water for washing shrimps also create hygienic problems. The shrimp resources are being over exploited and as the shrimp stock decline fishing rate would decline. There is an urgent need of commercial shrimp aquaculture on Sindh Coast near Indus Delta. A higher value addition in fishery products through better fish handling, processing, and marketing practices need to be promoted. Improved marine and inland fisheries resource assessment and management would provide quick benefits.
Fish production of inland sector is projected to increase at 6.2 percent growth rate per annum [MINFAL, PARC & FAO (2000)]. Indus River and its tributaries, a large canal irrigation system, natural lakes and storage reservoirs besides farm fish pounds of varying sizes can generate high value added in the sector. The potential for inland fisheries in NWFP, Punjab, and Sindh provinces can be realized through development of aquaculture by promoting the private sector. The major problems and bottlenecks limiting inland fish productivity in the country are inadequate institutional and infrastructural facilities, lack of trained manpower, shortage of quality fish seed, non-availability of modern fishing gears, aquatic toxicity, shortage of proper storage and marketing facilities, and inadequate extension facilities. The specific research projects related to fisheries are given in the following. 5.4.1 Research Areas
1. Improving production efficiency of fish farming/inland fisheries
2. Fish feed development
3. Aquaculture and cage culture particularly for shrimps
4. Use of brackish water for fish production
5. Improving the quality of fish seed produced by hatcheries
5.4.2 Infrastructure and Technology Areas
1. Establishment of fisheries research institution in Sindh and Balochistan and up gradation of fisheries research institutes at the federal level and in Punjab and NWFP
2. Strengthening/establishment of shrimp/prawn hatcheries
3. Establishment of a network of diagnostic laboratories
4. Development of fish feed industry
5. Improvement of fishing boats and nets
6. Fish processing for value addition 5.5. FORESTRY AND RANGELANDS
The forests play a vital role in conserving environment and other natural resources and are themselves a source of valuable products. The total area under forest in Pakistan is 3.97 million hectare which is 4.99 percent of the total area which is quite low compared to the desired standards. Less than 30 percent of this area is economically utilized while the rest is under protective cover. The share of forestry in agriculture is slightly more than one percent. An excessive cutting, low reforestation, low survival rate of new seedlings, poor quality planting stock, and tree die back coupled with overgrazing and low regeneration have reduced the flora and fauna drastically in species and number.
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The production of timber wood in the country has increased from 0.182 million cubic meters in 1980-81 to 0.383 million cubic meters in 2001, while that of firewood increased from 0.46 to 0.54 million cubic meters during the same period. Agro forestry contributes about 46.3 percent of fuel wood and 90 percent of the timber. Pakistan is deficient in timber production and there is a demand gap of 0.734 million cubic meters. The import of wood and wood products during 1999-00 amounted to Rs. 8.5 billion.
Three quarters of the total geographical area of Pakistan consists of mountainous plateaus, deserts and uncultivated land of which 52 percent are rangelands. Only 12 percent of the rangelands (6.28 million hectares) are under the control of provincial forest departments, while the remaining area is used as a common property resource. Because of over-grazing and over exploitation, pastures are degraded and depleted and the health of animals is reported to be poor. There is a need to enhance rangeland productivity with active participation and training of local communities in rangeland management.
Forestry receives low priority in the national development plan. Forests are even considered as expandable resource, which could be liquidated to feed the development process. Low priority to the forestland has accentuated socio-economic disparities within the rural sector itself. The high population pressure induces rise in demand for fuel, food, and shelter. To meet these ever increasing demands deforestation rate is quite high and illegal encroachment of state -owned forestlands makes it even worse. This results in loss of grass land cover, soil erosion, reduced storage capacity of reservoirs due to sedimentation, water logging and salinity, and loss of habitat of flora and fauna. The process of degradation need to be halted before damage is done to our ecosystems to an irreversible extent. Afforestation of marginal and degraded lands and promotion of agro-forestry and social forestry need to be accorded top priority. The state owned forested need to regenerated and protected on sustainable basis by involving local communities in forest management. The Forest Department, Pak Army, and local communities can join hands to carry out afforestation especially in the mountainous northern and western regions and AJK. A promising potential exist for the development of agro forestry through provision of quality planting stock, guidance, and convincing the farmers about benefits of forestry. The following research projects related to forestry and rangelands are suggested.
5.5.1 Research Areas
1. Development of disease and insect resistant planting stock of various species of forest trees
2. Development of salt and drought tolerant species
3. Develop technology to improve forage productivity on rangelands
4. Promotion of participation of local communities and training them in management of rangelands
5.5.2 Action Plan
The action plans regarding field crops, horticultural crops, livestock, fisheries, forestry, agro-processing, and agricultural biotechnology are annexed at the end of this document. The specific agricultural R&D projects for crops, livestock, and fisheries with associated time frame, costs, and nodal agencies/research institutions are listed in Annexure 5.VI through 5.XIII. The summary tables for costs and the cost benefit analysis are presented in Annexure 5.XVII through 5.XX. Brief details about proposed action are given in Annexure 5.XX1.
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5.6 AGRO-PROCESSING
5.6.1 Milk Production and Processing
Pakistan is ranked as the 5th largest milk producing country in the world. Buffaloes and cows contribute the major share to milk production and are raised in rural subsistence and market oriented smallholdings, rural commercial farms, and peri-urban commercial dairy farms. During the last two decades of the past century, milk production increased at a growth rate of over 6 percent. Despite a reasonable growth there are major concerns in the area of milk production faced by the dairy sector in Pakistan. The national average milk yield is quite low as compared to the potential yield demonstrated at the research stations or realized at progressive farms and in the developed and other developing countries (Tables 5.1 – 5.3). The animals are generally underfed and use of quality feed is limited. Only a small proportion of total milk production is marketed and the rural households traditionally process most of the produce to make “ghee” (butter oil) and other milk products. The raw milk marketed through a large chain of intermediaries often lack quality due to non-adoption of clean milk production practices at the farm level, lack of chilling facilities, use of substandard containers, and adulteration. The control over fresh milk prices offers little economic incentives to the farmers.
Small/cottage scale businesses as well as large-scale private companies are involved in the processing of milk in Pakistan. Presently, there are 38 major dairy plants in the commercial sector with a daily rated capacity of 2.18 million litres. However, only 13 plants are in operation with milk processing capacity of over one million litres per day. In addition, two military dairy plants are in operation on non-commercial basis. The capacity utilization of dairy plants in operation is around 40 percent mainly due to depressed demand for processed milk and milk products [Experts Advisory Cell (2003)]. The milk products include cheese, ice cream, indigenous dairy products, butter, liquid milk, dried milk, and other products. Higher frequency of milk collection due to inadequate chilling facilities; increasing energy costs; inefficient milk collection, processing, and distribution system; and costly packaging result in high prices of processed milk and milk products relative to the fresh milk or traditionally processed milk products. The processed milk products have a depressed demand and there is considerable under utilized processing capacity in the industry.
Less than 2 percent of the total milk produced in the country is being processed at the dairy plants while in India 12 percent of the milk production is processed in the organized sector. The processed milk products include HTST pasteurized milk, UHT treated milk, condensed milk, dry milk powder, yogurt, butter, cheese, and some other milk product. About half of the available milk to the industry is processed into UHT milk, 40 percent into powdered milk, and the rest into other milk products like pasteurized milk, yogurt, cheese, and butter etc. Despite a fairly long list of processed products the diversification (flavor and fat based), byproduct extraction and value addition has been low. Especially, the value added cheese has the immense potential for local as well as the international market. However, to make it viable, the byproduct whey needs to be utilized fully for further product development rather than wasting.
A review of the current status of the milk sector and the future scenario brings into focus important issues which need to be addressed for realizing the full potential of the milk sector in the country. The following actions are recommended for the development of dairy sector in the country:
• Promotion of clean milk production at the farm level in the short and medium run
• Fat content of milk to remain the basis for payment at farm level and should be extended to SNF basis payment by large modern dairies in the short run
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• Bacterial count and ultimately total milk quality should form the basis of payment in the medium and the long run
• Promotion of milk chilling at the village level and organization of the farmers in the short and medium run
• Reducing the milk collection frequency in the long run.
• Promotion of the demand for HTST pasteurized milk in the short run
• Introducing UHT milk and promoting its demand through programs like food for school children in selected area and subsidized export in the short run (subsidy to be gradually withdrawn)
• Product diversification towards high value added products and extraction of byproducts.
• Food safety regulations incorporating complete milk quality standards and strict implementation to protect the consumers.
• Imposing of a ban on selling of unprocessed open milk in selected cities by year 2010 and a complete ban in other parts by 2015.
5.6.2 Fruits and Vegetables Processing
The production of fruits and vegetables are increasing in Pakistan. However, low yields and inferior quality are frequent problems in horticultural crops. Non-standardized nursery plant, non-availability of disease free seeds, poor management and cultural practices, and high post harvest losses are the main issues related to production of fruits and vegetables. The availability of high quality planting material is a serious problem faced by the growers all over the country and even the growers who would like to procure better quality planting material are unable to do so. The post harvest losses are reported as high as more than 30-40 percent for horticultural crops causing a loss of over Rs.49 billion every year. Our horticultural products often have short shelf live and the quality usually falls short of being suitable for processing. A long chain of marketing agents are involved before the produce reaches in the hands of final consumers. These marketing intermediaries claim a major share in consumers’ rupee leaving the growers with very low returns. A major chunk of the total production of vegetables and fruits is consumed or exported in raw/fresh form and only a small proportion of it is processed.
In Pakistan, fruit and vegetable growing is highly dispersed with a large number of (usually small) farmers involved in production of these crops. They usually grow poor planting material of different species/varieties of fruits and many among them follow diverse and usually un-standardized cultivation practices. As a result, the quality of fruits and vegetables is not uniform. This affects quality of processed products and their acceptability by the consumer, specifically in the international markets. Moreover, no distinct varieties are being developed for table consumption and processing purposes. For example, mango which have firm pulp containing little if any fiber are most suitable for table consumption and mangoes with soft pulp (may be more of less fibrous) will be good for juice. The color of pulp may be less important in table mangoes and more important in juicy mangoes. Similarly, mangoes making raw material for pickles, jams and canned slices may be of totally different color, taste, and aroma.
In horticultural crops harvesting is mostly done manually with age-old tools. While the manual harvesting of fruits may continue, improved hand tools and with a possible training of the pickers to reduce fruit in juries during harvest may be employed. The use of effective pre-cooling techniques is rarely employed and most of the growers/contractors use conventional method of
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storing in shade and sprinkling it with water. Grading of the produce is done rarely and mostly by visual inspection only; in main production areas for some fruits (e.g. citrus) and vegetable (e.g. potatoes), mechanical grading has started. Storage facilities at the farm level are improper and markets usually lack adequate cold storage capacity and the limited cold storage capacity is mostly confined to Punjab. The processors depend on a large number of markets and growers to meet their needs resulting in operational difficulties of coordinating with a large number of growers and monitoring raw material quality. The processing industry comprises of generally small cottage businesses though there are also large scale processing units. The traditional technologies used for preservation and processing especially in small units need to be improved.
Due to high prices of processed food items and seasonal availability of one or the other fresh fruit/vegetable throughout the year, demand for the processed products is low. The high energy and packaging costs are among the major reasons for high prices of processed products. The recommended actions are summarized in the following:
• Improving quality of raw material of processing by developing new varieties of fruits and vegetables with characteristics suited for processing and promoting these varieties among farmers by entering into by-back agreements and/or premium prices.
• Identification of consumer preferences in the targeted international and national markets and redirection of the research efforts and processing activities to meet these requirements
• Suitable regulation and enforcement infrastructure for to ensure quality of products especially for export
• Low energy prices and tariff rationalization for materials used in packaging industry
• Subsidy in the form of low freight charges for export of horticultural products and airport facilities in major production areas with all facilities available under one roof.
• Promotion of packaging industry for production of low-price packing materials.
5.6.3 Action Plan
The action plans for agro-processing are presented in Annexure 5.XV to 5.XVI. The summary tables for costs and the cost benefit analysis are presented in Annexure 5.XVII through 5.XX. Brief details about proposed action are given in Annexure 5.XX1. 5.7. BIOTECHNOLOGY IN AGRICULTURE
It is widely accepted that the conventional breeding, widely used during the Green Revolution era, no longer offer any significant breakthroughs in the yield potentials and in providing solution to the complex problems of pests, diseases, and drought stress. The recent achievements in the field of biotechnology offer the potential to increase the crop and livestock productivity; improve nutritional quality, broaden crop tolerance against biotic and abiotic stresses, and enhance crop resistance against pests and diseases. The tools of modern biotechnology are precise and make development of new strains of improved crop and livestock more rapid [Asian Development Bank (2001)]. It is envisaged that the next breakthrough in agricultural productivity would be due to recent developments in plant molecular biology, genetic engineering, and rapid advancement in genomics [Zafar and Malik (2003)].
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Traditional biotech activities particularly related to plant tissue culture have been carried out in few academic and research institutions of Pakistan since 1970s. An exclusive national center of Molecular Biology (CEMB) was established in 1983-84 at Lahore. The National Institute for Biotechnology and Genetic Engineering (NIBGE) started work at Faisalabad in 1994. During the past few years, there is growing interest in establishing Biotech centers in major cities. Despite all these developments, there is no coherent national policy regarding biotechnology in general and agriculture biotechnology in particular.
Agricultural Biotechnology R&D is suggested to focus areas of traditional biotechnology as well as modern biotechnology like genetic engineering and plant genomics. The techniques of modern biotechnology can be applied to diagnosis of pests, diseases, contaminants, and quality traits; micro-propagation to provide disease free plantlets of vegetatively propagated species (that do not readily produce seed); generating genetic markers, maps, and genomic information in marker assisted selection and breeding; and in developing transgenic plants with higher yields, disease and pest resistance, tolerance of environmental stresses, and improved nutrition in crops. This part of the study provide short, medium and long terms R&D projects in biotechnology to realize the vast potential of this new emerging technology for agriculture sector in Pakistan. 5.7.1 Micro-propagation and Tissue Culture
The tissue culture technology has been applied to provide virus free plants and micro propagation of plants that grow slowly or do not yield seed. In national context this technique is particularly useful in crops grown vegetatively and also for floriculture some of which are listed below:
Potato Olive Pistachio Banana Papaya Grapes Sugarcane Coconut Root stock of fruit trees Date palm Strawberries Ornamental plants
Except potato, so far there is no visible economic impact of this technology. The agriculture sector has so far not benefited from the full potential of tissue culture technology, as research effort at public and private levels is small. The size of these efforts in term of researchers and financial resources is still very small and unable to reach commercial scale except in case of potato and recently to some extent in banana. Plant tissue culture is a simple and well-known technology being used on a small scale in various national centers of the country. The following R&D areas in tissue culture are suggested.
• Virus free seed potato
• Virus free banana plants, dates, grapes, and other fruit plants
• Micro propagation of disease free sugarcane saplings, medicinal plants, cut flower, and ornamental plants
5.7.2 Bio-pesticides
Biological pest control is another promising area for research in agricultural biotechnology. The high use of chemical pesticides to control pests and diseases has not resulted only in high production costs but also has serious implications for environment and national health. The chemical pesticides are highly inefficient as most of the sprayed chemical are washed away from plant surface and end up in the soils. The chemical residues have already started appearing in our food chain and feeds of livestock. In these circumstances, it is particularly
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important that efforts are made to substitute chemical pesticides with bio-pesticides, which are environmentally friendly and are more target specific (do not destroy beneficial organisms) and do not leave harmful residues. The research in following areas is recommended:
• The search of novel bio-pesticides with improved efficacy, potency and increased shelf life should be carried out.
• Establishment of a network of production and dissemination units in every district of the country by copying the existing units.
• Development of transgenic plants with Bt toxin (for cotton, rice, chickpea, oilseeds, tomatoes, potatoes, cucumber, and melons)
5.7.3 Bio-fertilizers
In Pakistan, soils are generally deficient in organic matter and essential plant nutrients, due to high temperature and intense microbial activity. The application of organic fertilizer (farmyard manure and green manure) is limited and that of chemical fertilizers is increasing. Coupled with unbalanced use and faulty management practices the fertilizer efficiency is quite low. It results not only in rising production costs but also in degradation of land and water resources. The development and use of bio-fertilizers in combination with organic and chemical fertilizer may improve crop yields, reduce costs, and conserve land and water resources. In Pakistan, the government directly or indirectly supports much of the production of bio-fertilizers. NIAB/NIBGE, Faisalabad, NARC, Islamabad, University of Agriculture, Faisalabad and several provincial institutes are involved in research on bio-fertilizers.
The demand for bio-fertilizers is nominal due to poor and uneven quality, short shelf life, absence of distribution system, and small contribution to crop yield. The research efforts to increase the shelf life and effectiveness of bio-fertilizers through genetic manipulation of strains are crucial for enhancing acceptance and use of bio-fertilizers in the country. The following proposed R&D efforts will result in sustainable agriculture and popularization of these technologies to the farmers.
• Research projects must be initiated to develop effective bio-fertilizer for solubilization of bound phosphorus, able to tolerate drought/high temperature and salinity.
• Encouraging the development of a country wide commercial network of bio-fertilizer production and dissemination units with necessary incentives and technical guidance from institutions like NIBGE, Faisalabad.
• Vigorous extension and farmers participatory projects on application of bio-fertilizers as part of integrated plant nutrition system (IPNS).
5.7.4 Crop Improvement and Modern Biotechnology
The modern biotechnology has widened the range of useful traits that can be applied to develop new varieties by the virtue of technical ability to transfer genes conveying desirable traits from any organism into any other. Moreover, it reduces time in which desired changes in plant characteristics can be made to about half of that required through traditional methods. These techniques can be applied to develop disease and insect resistance, tolerance to abiotic stresses, product quality, and increasing yield potential. Incidence of pest and insect attacks, diseases, drought, high temperature, and salinity/sodicity are among the most important constraint to agricultural production in Pakistan. Development of varieties resistant to pests and diseases and
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with improved tolerance to abiotic stresses should be the main focus of future crop breeding research.
In Pakistan, crop improvement efforts using modern technology started as early as 1985 at CEMB, Lahore and later NIBGE initiated genetic engineering of plants during early 1990s. Most of the activities are related to rice and cotton but recently tomato and potato are also taken up. Although transgenic plants have been developed at these centers, work on field evaluation is blocked due to absence of biosafety rules. Further, delay and uncertainty is expected due to actual performance of genetically engineered crop in the field and difficulties to protect it from further use by various public and private seed agencies. According to the most optimistic estimates, it will take at least 2-3 years before plants with desired traits can be produced and used in breeding programs [Zafar and Malik (2003)].
The delivery of the products is strictly regulated by various international conventions thus co-current national capacity building for application of biosafety guidelines, handling of GM products and import/export of GM crops/foods are equally important and vital for its commercial applications. The national efforts except development of GM crops are much below the desired level. Following projects are proposed for a higher agricultural growth.
• Projects for developing disease resistant (bacteria, fungus, insects, virus) plants of priority crops (cotton, chickpea, oil crops, potato, tomato, papaya, cucumber, melons)
• Availability of novel genes is one of the biggest impediments of progress of genetic engineering. Establishment of a national depository is crucial.
• Liberal funding should be provided for the biosafe technology of chloroplast transformation.
5.7.5 Genome Research
In Pakistan, genomic research in Human (Diversity) is being carried out at KRL, Medical Centers, Quaid-i-Azam University, Islamabad and CEMB, Lahore. Applied genomics (Molecular Diagnostics) have now increasingly been adopted by various public and private sector labs in health sector. Recently DNA fingerprinting for forensic purpose has been established in a public research center (CEMB, Lahore).
In Plant Genomics, the country is yet to take a start. NIBGE, Faisalabad, has conducted research for estimating genetic diversity among different crop plants. Construction of genetic linkage maps is fundamental step for detailed genetic study and marker assisted breeding approach in any crop. Efforts are being made to develop genetic linkage maps for different traits of interest in cotton as well as of wheat. The uplift of the genomic research in the country is needed. The following actions are recommended in this regard.
• DNA Fingerprinting • DNA fingerprinting (DNA based tests on different crops) • Development of Genome maps • Establishment of Functional Genomics Centers at NIBGE, Faisalabad; CEMB,
Lahore; HEJ/KIBGE, Karachi, and QAU, Islamabad 5.7.6 Action Plan
The action plans for agricultural biotechnology is presented in Annexure 5.XIV. The summary tables for costs and the cost benefit analysis are presented in Annexure 5.XVII through 5.XX. Brief details about proposed action are given in Annexure 5.XX1.
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Annexure 5.1
Total Factor Productivity (TFP) Growth Rates for Agriculture Wizarat (1981) Khan (1994) Khan(1997) Ali (2000) Kemal, et al
A: 1954-60
-1.5 - - -
1960-65 0.8 - 1.0 1.2 1965-70 6.9 - 3.2 4.4 4.0 1960-70 3.8 - 2.1 2.8 1970-75 -1.5 - -0.7 0.1 1975-80 1.9 - 0.4 1.8 1970-80 0.0 - 0.0 1.0 -0.77 1980-85 - 1.9 1.0 2.2 1985-90 - 1.0 0.4 2.4 1980-90 - 1.6 0.7 2.3 -1.32 1990-95 - 3.4 1.2 3.7 1991-2001 1.52 1964-2001 0.37 Average 1.9 0.9 2.3
Rosegrant and Evenson (1993) Martin and Mitra
(nd)
Ali and Byerlee (2000) [Punjab]
Ahmad (2001) [Punjab]
B:
Pakistan Punjab Overall Crops Crops 1956-65 1.6 1.4 - - 1965-75 1.9 2.1 - -0.2 -0.5 1975-85 -0.4 -0.8 - 1.2 1.3 1956-85 1.1 1.6 - - - 1985-94 - - - 2.3 1.6 1967-92 - - 1.7 to 3.1 - - 1966-94 - - - 1.5 1.3 1992-99 - - - - - 2.6
105
Annexure 5.2
Cropping Intensity at Various Farm Sizes (Percent)
Province and Farm Sizes 1980 Census 1990 Census 2000 Census Punjab Private Farms Total 123.60 141.48 154.15 Under 2.0 143.11 160.30 168.95 2.0 to under 5.0 130.73 148.15 159.89 5.0 to under 10.0 122.22 138.13 151.48 10.0 and above 115.40 131.35 141.22 Sindh Private Farms Total 129.52 139.91 129.60 Under 2.0 157.12 161.31 145.63 2.0 to under 5.0 140.86 150.52 140.06 5.0 to under 10.0 123.49 130.52 130.52 10.0 and above 112.13 126.07 113.63 NWFP Private Farms Total 120.59 132.06 141.51 Under 2.0 154.56 156.36 160.27 2.0 to under 5.0 133.63 138.69 144.67 5.0 to under 10.0 114.34 121.69 126.72 10.0 and above 90.42 102.16 112.15 Balochistan Private Farms Total 31.51 94.38 77.86 Under 2.0 38.41 107.64 91.62 2.0 to under 5.0 34.67 105.10 92.61 5.0 to under 10.0 33.52 98.84 82.92 10.0 and above 29.29 89.25 68.68 Pakistan Private Farms Total 121.71 136.66 142.14 Under 2.0 146.23 158.51 161.54 2.0 to under 5.0 131.86 145.89 151.07 5.0 to under 10.0 120.06 132.93 140.20 10.0 and above 109.19 122.68 123.79
Source: Pakistan (1983, 1993, and 2003)
106
Annexure 5.3
Fertilizer Consumption in Relation to Cultivated Area in Selected Countries (Kgs per Hectare)
Netherland Germany Japan France Egypt Italy USA USSR Pakistan India
1979-80 805 479 478 312 212 189 111 75 51 30 1980-81 789 471 372 301 232 170 112 81 53 31 1981-82 767 418 387 298 248 163 102 83 53 39 1982-83 738 435 412 299 335 161 87 87 61 35 1983-84 789 431 437 312 361 169 105 99 59 39 1984.85 841 445 452 326 387 178 126 - 63 - 1985-86 770 428 427 309 319 169 92 114 86 57 1986-87 688 421 433 299 351 190 93 182 83 54 1987-88 702 433 491 328 388 254 95 120 83 53 1988-89 685 468 468 335 448 231 94 119 84 67 1989-90 663 467 467 341 452 201 100 109 91 70 1990-91 610 394 451 316 401 200 96 111 92 72 1991-92 599 - 431 309 405 220 71 85 91 77 1992-93 599 239 395 253 339 156 101 42 101 72 1993-94 560 221 407 237 - 148 108 - 97 73 1994-95 554 240 400 242 304 159 103 12 103 80 1999-00 - 243 - 248 355 - - - 117 99 2000-01 470 232 - 225 - 211 106 - 138 103
Source: Pakistan 2003a Note: - Not Available Data from 1995-96 to 1998-99 not available
Annexure 5.4
Research Expenditure per Scientist in Selected Asian Countries (1980)
Country Thousand US dollars Malaysia 56.4 Papua New Guinea 45.9 Indonesia 30.2 India 21.8 Bangladesh 16.2 Philippines 15.5 Thailand 15.3 Nepal 12.4 Sri Lanka 10.9 Pakistan 8.9
Source: Azam et. al. (1991)
107
Annexure 5.5
Share of Agriculture and Water in Total PSDP/ADP Amount in million rupees Percent Share
Years Agriculture Water Total Agriculture Water
Agriculture + Water
1980-81 3340 1616 26137 12.78 6.18 18.96 1981-82 3427 2808 27000 12.69 10.40 23.09 1982-83 3457 3840 29563 11.69 12.99 24.68 1983-84 2798 3381 28161 9.94 12.01 21.94 1984-85 2920 3541 32606 8.96 10.86 19.82 1985-86 4435 4589 37576 11.80 12.21 24.02 1986-87 3221 4129 42579 7.56 9.70 17.26 1987-88 3493 4538 46548 7.50 9.75 17.25 1988-89 3990 3389 47844 8.34 7.08 15.42 1989-90 3012 5440 57705 5.22 9.43 14.65 1990-91 3042 6815 88412 3.44 7.71 11.15 1991-92 3692 5554 89629 4.12 6.20 10.32 1992-93 3461 8461 119890 2.89 7.06 9.94 1993-94 2164 12265 145252 1.49 8.44 9.93 1994-95 2004 14109 153720 1.30 9.18 10.48 1995-96 1561 14947 172816 0.90 8.65 9.55 1996-97 1210 15740 139743 0.87 11.26 12.13 1997-98 940 11233 141495 0.66 7.94 8.60 1998-99 431 12319 152707 0.28 8.07 8.35 1999-00 540 11380 148767 0.36 7.65 8.01 2000-01 820 11596 150325 0.55 7.71 8.26 2001-02 168 16177 130000 0.13 12.44 12.57 2002-03 797 10914 134000 0.59 8.14 8.74 2003-04 1500 14689 160000 0.94 9.18 10.12
Source: Pakistan 2003b (Statistical Supplement)
108
Annexure-5.6
Actions Recommended for Realizing Unachieved Potential Action Needed Agency to execute Time (year) Cost
(million Rs) Expected impact
S&T
Strengthening of agricultural extension system
Provincial Govt. and private sector
5 Cont. as ND
9993 Improved farm management and higher yields
Strengthening seed production and distribution system
Provincial ARIs, FSC&R, and private sector
5 Cont. as ND
5690 Improved yields S&T
Development & commercialization of hybrid seeds varieties
NARC, NIAB, NIBGE, Provincial ARIs, Universities
5 Cont. as ND
2306 Increased yields S&T
Enhanced access to institutional credit
ZTBL, Co m. Banks, Provincial Banks, NGOs
Up to 2010 ---- Increased input use and farm production
Development of technologies for organic food production
NARC, PCSIR, Provincial ARIs, Universities
5 Cont. as ND
1729 increased fruit export earning
S&T
Annexure-5.7
Actions Recommended for Arresting Degradation of Land Resources Action Needed Agency to execute Time (year) Cost
(million Rs)
Expected impact S&T
Integrated plant nutrient system (IPNS)
Soil fertility Dept. of provinces, NFDC, and extension Depts.
5 Cont. as ND
3226
Increased yield and quality of produce
S&T
Promotion of gypsum application for treatment of saline/sodic lands
OFWM, Provincial, and district Governments
10 Cont. as ND
18270
Improved soil health and enhanced/sustained production
Crop and soil nutrient indexing
Soil fertility, NARC, Provincial ARIs, and Universities
5 Cont. as ND
3894
Yield increase and improved quality of produce
S&T
109
Annexure-5.8
Actions Recommended for Enhancing Water Use Efficiency Action Needed Agency to execute Time
(year) Cost
(million Rs) Expected impact
S&T
Use of laser land leveling technology
OFWM, Prov. Agri. Dept. and private sector
5 Cont. as
ND
3742
saving of field level water loss
Testing and promotion of water conserving irrigation technologies
NARC, OFWM, Provincial ARIs and private sector
5 Cont. as
ND
403
Water saving, input use efficiency
S&T
Improving irrigation efficiency through lining of canals and water channels
OFWM, Provincial government
10 Cont. as
ND
80424 saving of water losses
Studies on proper water pricing reflecting scarcity of resource
NARC, PIDA, Agricultural Universities
3 18 enhanced water use efficiency, reduced burden on Govt. exchequer, and increased O&M
S&T
Annexure-5.9
Actions Recommended for Enhancing Milk and Meat Yield Action Needed Agency to execute Time
(year) Cost
(million Rs) Expected impact
S&T
Improvement of local breeds of buffalo and cows
NARC, Universities, and Prov. Livestock Dept.
10 Cont. as
ND
4072
increased milk yield potential by
S&T
Improved vaccine development for important diseases of livestock
Universities NARC, Prov. Livestock Res. Institutes
5 Cont. as
ND
2445
Increased milk production and meat production
S&T
Improvement of non descript breeds through artificial insemination
Prov. Livestock Dept., Semen Production Units, Universities
10 Cont. as
ND
6238 increase in average milk yield,
S&T
Strengthening/up gradation of semen production units
Prov. Livestock Dept., Semen Production units
3 Cont. as
ND
3943
Improved semen production
S&T
Development of beef and mutton breeds
NARC, Universities, Prov. Liv. breeding & experiment stations
10 Cont. as
ND
1604 increase in meat production
S&T
Promotion of balanced feed for milk production
NARC, Prov. Liv. breeding and experiment stations, Liv. feed industry
5 1461
increase in average milk yield
S&T
Fodder and range land management
MINFAL, PARC, Provincial Agri. Departments
10 Cont. as
ND
1065 20% increase in production
S&T
110
Annexure-5.10
Actions Recommended for Reduction of Post Harvest Losses Action Needed Agency to
execute Time (year) Cost
(million Rs) Expected impact
S&T
Improvement of post harvest handling technologies
NARC, Provincial ARIs, and Agriculture Universities
5 Cont. as ND
746
Saving of 5% post harvest losses
S&T
Development of storage, cold storage, and transport infrastructure
Provincial governments & private sector
5 3248
Saving of 10% post harvest losses
Improving shelf life of fruits & vegetables
NARC, NIBGE, Provincial Horticulture Res. Institutes, Universities
10 Cont. as ND
150
5% saving in post harvest losses
S&T
Annexure-5.11
Establishment of Quality Testing and Residue Testing Labs Action Needed Agency to
execute Time (year) Cost
(million Rs) Expected impact S&T
Establishment of quality testing and residue testing labs
MoST, NARC, MINFAL
5 Cont. as ND
11616 Improved produce quality, national health and increased exports
S&T
Proposed Types and Locations of Labs Province Grain Testing Residue Testing Total
Punjab 3 3 6
Sindh 2 2 4
NWFP 1 1 2
Balochistan 1 1 2
AJK 1 1 2
Total 8 8 16
111
Annexure-5.12
Actions Recommended for Enhancing Productivity of National Agricultural Research System Action Needed Agency to
execute Time (year)
Cost (million Rs)
Expected impact
S&T
Human Resource Development for NARS
HEC 10 Cont. as
ND
362868
technology development at higher pace
S&T
Access to digital library facilities
HEC 3 Cont. as
ND
3219
Improved research
Upgrading of laboratory facilities
PARC, PAEC, MOST, Prov. ARIs, and Universities
5 6536
Improved research
S&T
Service structure for NARS scientists similar to PAEC
Federal and provincial governments
With in 3 years
-----
Enhanced productivity of NARS
Annexure-5.13
Actions Recommended for Exploitation of Potential in Fisheries Action Needed Agency to execute Time (year) Cost
(million Rs) Expected impact
S&T
Strengthening of fisheries research
MOST and Provincial departments of fisheries
5 Cont. as ND
2262
Increased pace of fish production technologies
S&T
Improving the quality of fish seed
HEC (training part), Hatcheries, and Fisheries Res. Institutes
5 Cont. as ND
1075
20% higher fish yield
S&T
Aquaculture and cage culture for shrimps
Sindh Fisheries Department, University of Karachi, NIO
5 Cont. as ND
2082 Increased production of shrimps
S&T
Use of brackish water for fish production
NARC, Provincial fisheries departments, Vet. University, UAF
5 Cont. as ND
483
Increased fish production
S&T
Development of fish feed
NARC, Provincial Dept. of fisheries, Univ. of Vet. & Animal Sciences, UAF
5 Cont. as ND
541
Increased fish production
S&T
112
Annexure-5.14
Actions Recommended for Exploitation of Potential of Agricultural Biotechnology Action Needed Agency to execute Time (year) Cost
(million Rs) Expected impact S&T
Development of HYV varieties resistant to biotic and abiotic stress
NARC, NIBGE, NIAB, CCRI, Provincial ARIs, Universities
7 Cont… as
ND
5455
increase in national average yield of selected crops
S&T
Production of virus free seed through tissue culture
NIBGE, NARC, CEMB, provincial ARIs, and private seed companies
5 Cont... as
ND
2296
increase in average yield of selected crops
S&T
Development of effective bio-fertilizer
NIBGE, NARC, and Ayub Agricultural Research Institute
5 Cont... as
ND
1256
S&T
Search of novel bio-pesticides with improved efficacy, potency, and increased shelf life
NIA, TARI/PARC (Karachi), NARC, NIAB, and private sector
5 Cont. as ND
905
Reduced cost, increased yield, & environmental gains
S&T
Development of genome maps
NARC, NIBGE, CCRI, IBGE, CABB, and AARI
5 927
Information for use in marker assisted breeding in crops
S&T
Strengthening plant genomic research
Universities, NIBGE, NARC, and Prov. ARIs
5 Cont. as ND
3216
Capacity in genome research
S&T
Annexure-5.15
Actions Recommended for Development of Milk Processing Action Needed Agency to execute Time
(year) Cost
(million Rs) Expected impact S&T
Milk chilling units at village level and use of LPS for milk Pres. in remote areas
Dairy Dev. Departments and milk processing industry
5 Cont. as
ND
8470 Better quality and increased milk marketing
Promotion of demand for processed milk and powder milk
Dairy Dev. Departments and milk processing industry
5 1660
Increased capacity utilization, health gains
113
Annexure-5.16
Actions Recommended for Development of Fruits and Vegetables Processing Action Needed Agency to execute Time (year) Cost
(million Rs) Expected impact S&T
Establishment of certification system for nursery plants
Prov. Horticulture Res. Institutions, FSC&R Dept., Universities, and Private sector
5 Cont… as
ND
2036 Increase yield and improved quality
S&T
Establishment of irradiation plants
Horticulture Board, MOST and PAEC
3 Cont… as
ND
3822
Improved export earnings
S&T
Development of grading and packaging capacity
ZTBL, Horticulture Board, private sector
5 80
Better prices & reduced losses
Annexure-5.17
Summary Table for Costs up to 2009-10 (million rupees) R&D Activities 2005-06 2006-07 2007-08 2008-09 2009-10 Sub-Total Realizing unachieved potential in agriculture 494.00 800.00 900.00 954.00 1065.00 4213.00 Conserving land resources 660.00 839.00 920.00 1090.00 1480.00 4989.00 Enhancing water use efficiency 872.00 1442.50 2563.00 3700.75 4551.03 13129.28 Enhancing milk and meat yield 400.00 665.00 795.00 920.00 1045.00 3825.00 Reducing post harvest losses 75.00 105.50 136.00 166.50 197.00 680.00 Establishment of proper quality control system 400.00 550.00 580.00 620.00 650.00 2800.00 Revitalization of national agricultural research system 4171.00 6123.00 9022.00 13348.00 17979.00 50643.00 Exploiting the potential of inland fisheries 120.00 180.00 245.00 305.00 385.00 1235.00 Exploiting the potential of agricultural biotechnology 400.00 485.00 578.00 675.00 775.00 2913.00 Enhancing milk processing 290.00 425.00 500.00 555.00 625.00 2395.00 Enhancing fruits and vegetables processing 135.00 210.00 270.00 320.00 365.00 1300.00 Total 8017.00 11825.00 16509.00 22654.25 29117.03 88122.28
114
Annexure-5.18
Summary Table for Costs up to 2010-11 to 2014-15 (million rupees) R&D Activities 2010-11 2011-12 2012-13 2013-14 2014-15 Sub-Total
Realizing unachieved potential in agriculture 1180.00 1263.00 1336.65 1414.98 1515.73 6710.36 Conserving land resources 1613.00 1660.95 1831.00 1908.20 2103.61 9116.75 Enhancing water use efficiency 5063.51 5673.01 5986.66 6400.99 6716.04 29840.20 Enhancing milk and meat yield 1175.00 1305.00 1423.75 1542.94 1659.58 7106.27 Reducing post harvest losses 228.00 259.00 287.50 316.13 344.88 1435.51 Establishment of proper quality control system 690.00 725.00 775.00 813.75 854.44 3858.19 Revitalization of national agricultural research system 23070.50 25013.48 26996.95 29052.95 31145.49 135279.36 Exploiting the potential of inland fisheries 505.00 544.70 455.02 472.00 489.71 2466.44 Exploiting the potential of agricultural biotechnology 870.00 938.50 978.48 1033.90 1080.84 4901.72 Enhancing milk processing 675.00 750.00 807.50 871.38 936.69 4040.57 Enhancing fruits and vegetables processing 377.50 390.88 405.17 425.43 446.70 2045.67 Total 35447.51 38523.51 41283.67 44252.63 47293.72 206801.04
Annexure-5.19 Summary Table for Costs up to 2015-16 to 2019-20 (million rupees) R&D Activities 2015-16 2016-17 2017-18 2018-19 2019-20 Sub-Total G. Total Realizing unachieved potential in agriculture 1591.52 1671.09 1754.65 1842.38 1934.50 8794.14 19717.51 Conserving land resources 2060.29 2140.30 2247.32 2359.68 2477.67 11285.26 25391.01 Enhancing water use efficiency 7531.84 7908.43 8303.85 8719.05 9155.00 41618.18 84587.65 Enhancing milk and meat yield 1770.96 1868.26 1974.67 2081.41 2200.68 9895.99 20827.26 Reducing post harvest losses 373.38 402.04 404.90 414.94 433.19 2028.44 4143.95 Establishment of proper quality control system 897.16 942.02 989.12 1038.57 1090.50 4957.37 11615.56 Revitalization of national agricultural research system 33128.87 35131.16 37248.47 39481.89 41710.54 186700.93 372623.29 Exploiting the potential of inland fisheries 508.19 527.47 547.59 568.60 590.53 2742.38 6443.82 Exploiting the potential of agricultural biotechnology 1129.39 1185.86 1245.15 1307.41 1372.78 6240.57 14055.29 Enhancing milk processing 668.53 701.95 737.05 773.91 812.60 3694.04 10129.61 Enhancing fruits and vegetables processing 469.03 492.49 517.11 542.96 570.11 2591.71 5937.38 Total 50129.15 52971.08 55969.88 59130.80 62348.09 280549.01 575472.32
115
Annexure-5.20
Cost Benefit Analysis (million rupees) Year Costs Benefits Net benefits 2005-06 8017.00 2267.21 -5749.79 2006-07 11825.00 9582.94 -2242.06 2007-08 16509.00 20672.23 4163.23 2008-09 22654.25 35373.17 12718.92 2009-10 29117.03 52443.76 23326.73 2010-11 35447.51 73624.99 38177.49 2011-12 38523.51 100532.32 62008.81 2012-13 41283.67 134225.85 92942.18 2013-14 44252.63 175773.24 131520.61 2014-15 47293.72 226438.15 179144.43 2015-16 50129.15 282696.97 232567.82 2016-17 52971.08 345542.71 292571.63 2017-18 55969.88 415597.59 359627.71 2018-19 59130.80 491787.17 432656.36 2019-20 62348.09 576552.56 514204.47
Total 575472.32 2943110.86 2367638.54 Net Present Value (NPV) = Rs. 614 billion
Internal Rate of Return (IRR) = 108 percent
116
Annexure 5.21
Important Issues in Agriculture A. Low yields/wide unachieved potential B. Weak National Agricultural Research System C. Degradation of land resources: nutrient mining and salinity D. Inefficient use of water/poor quality water E. Low milk and meat yields per animal F. High post harvest losses G. Lack of a proper quality control system for agriculture H. Low utilization of emerging scientific techniques I. Low value addition in agro processing J. Low exploitation of potential of inland fisheries K. Poor marketing system L. High cost of inputs and agriculture machinery M. Compliance with WTO requirements Action Proposed for Realization of Unachieved Yield Potentials 1. Reorientation of the Agricultural Extension System
Action Details Ø Focus to be changed to complete skill transfer through participatory approach Ø Pre-service training for AOs and VOs -- courses on social mobilization, psychology,
participatory approach, use of computers and audiovisual aid equipment, extension management, and trade/ marketing related issues
Ø Equipment -- computers, mobile vans equipped with audiovisual aids Ø In service training for the technical and field staff Ø Strengthening training institutes
§ Training of trainers -- 6 months inland for all staff and at least 20 foreign trainings for technical staff members
§ Provision of equipment -- audiovisual aids, curriculum revision § Increasing non-establishment budget
Ø Improved service structure providing incentive for work as well as accountability Ø Enhanced use of electronic media – 2 hours time on TV for Agriculture related
programs (on production technologies, pest and location specific weather warning reports, marketing information etc.)
2. Seed Production and Distribution System
Action Details Ø Foundation seed production at research institutions
§ Establishment of foundation seed cells at each provincial ARIs responsible for meeting full requirements of pre-basic seed for public and private sector for all crops. Seed cell consisting of:
o Mini seed processing plants o Seed storage o Staff [7-8 breeders, 7-8 agronomists and 7-8 field assistants] Ø Seed multiplication: Technical staff and funds
§ Public sector seed production be continued to stop exploitation of the farmers by monopolies
117
§ Public sector seed production be continued to stop exploitation of the farmers by monopolies
§ Provincial Seed Corporations need strengthening: machinery, lab equipment, land, staff, and additional funds
Ø Federal seed certification and Registration (FSC&R) – (i) seed health labs at Karachi, Lahore, R.Y. Khan (ii) Seed Act enforcement for strict seed quality control
Ø Private--public partnership for quality seed production -- provision of basic seed and technical guidance by research institutions and FSC for seed multip lication by private sector. With following alternative arrangements
o On seed marketed by private sector royalty/seed cess may be charged o Entering into a buy back contract with private companies -- specified quality seed at a
pre-settled price 3. Developme nt & Commercialization of Hybrid Seeds Varieties
Action Details Ø Development of hybrid seeds for the crops:
- Rice -canola - sunflower - fodders - vegetables -flowers - wheat
Ø Private-public partnership for hybrid seed production – provision of technical guidance by research institutions/FSC&R
§ On seed marketed by private sector royalty/ seed cess may be charged § Entering into a buy back contract with private companies – specified quality seed at a pre-
settled price 4. Enhanced Access to Institutional Credit
Action Details Ø Coverage be enhanced to 50 % of total requirements with main focus on marginal (≤
6 acres) and small farmers (over 6 to ≤ 12.5 acres) Ø Interest on agricultural loans be competitive
5. Development of Technologies for Organic Food Production
Action Details Ø Development of production technologies for organic farming especially for
horticultural export crops Ø Certification mechanism according to international standards
B. Actions Proposed of Arresting Degradation of land resources 1. Integrated Plant Nutrient System (IPNS)
Action Details Ø Trials to establish effect of chemical fertilizers in combination with organic and bio-
fertilizers on crop yields & soil health in various agro-ecological zones Ø Promotion of the following through training, demonstration, mass media and
incentives § Proper management of FYM and crop residues § Use of FYM, green manure, crop residues, and bio-fertilizers in proper mix with chemical
fertilizers -- improve soil nutrients and fertilizer use efficiency § Balanced use of fertilizer nutrients and application of micro nutrients: Minimum required
ratio of N&P 2:1 against current ratio of N: P is 3.7:1 -- cross subsidy on DAP
118
2. Promotion of Gypsum Application for Treatment of Saline/Sodic Lands
Action Details Ø 50 % subsidized price for gypsum [a price of Rs. 900/tonne is estimated]
--price includes all costs of gypsum from rock to sale point for farmers and attractive profits for the agents involved
Ø Quality of gypsum (including size of mesh) must be controlled Ø Incentives to gypsum processors like credit and tax rebate
3. Crop and Soil Nutrient Indexing
Action Details Ø Crop and soil nutrient indexing in all districts Ø Strengthening of existing labs with equipment, trained staff, and funds Ø Establishment of new labs and extending the facility up to tehsil level
C. Actions Proposed for Enhancing Water Use Efficiency 1. Precise Land Leveling
Action Details Ø Provision of laser leveling machines on subsidized rents with special focus on small
and tenant farmers Ø Extension through mass media
Precise land leveling (continued …) Ø Incentives for private sector:
§ Credit for purchase of laser levelers § Tax free import of equipment § Subsidized renting of laser machines for 5 years
2. Testing and Promotion of Water Conserving Irrigation Technologies
Action Details Ø Testing of zero-tillage and permanent raised beds technologies for irrigated areas
wheat & cotton in respective zones - can be extended to other crops and areas
Ø Sprinkler irrigation in water scarce areas for horticultural crops and fodders Ø Drip irrigation in water scarce area for fruit trees
- Potential areas about 0.5 to 0.6 million acres in NWFP and Balochistan Ø Quality control -- irrigation equipment be certified Ø Incentives for the manufacturers of irrigation equipment:
- Credit facilities - Duty free machinery import - Technical advice - Tax rebate
Ø Incentives for the farmers: - Credit for irrigation equipment - guidance during installation - follow up supervision and training of farmers for maintenance of equipment
Ø Demonstration and promotion
119
3. Improving Irrigation Efficiency through Lining of Canals and Water Channels
Action Details Ø Canal lining at least the parts running through porous soils and in the brackish
groundwater zones Ø Lining of all the water channels
4. Studies on Proper Water Pricing Reflecting Scarcity of Resource
Action Details Ø Study on proper water pricing reflecting scarcity of resource
[Right pricing would enhance water use efficiency, raised revenue can support O&M at higher level]
D. Actions Proposed for Enhancing Milk and Meat Yields
1. Improvement of Local Breeds of Buffaloes and Cows
Action Details Ø Improvement of genetic potential of local breeds
Buffaloes: Cows: Nili Ravi and Kundi breeds Sahiwal and Red Sindhi
2. Improved Vaccine Development for Important Diseases of Livestock Action Details
Ø Establishing vaccine production facility for foot and mouth disease at federal level -- F&MDRC, Lahore has limited capacity
Ø Increased budget for vaccine production preferably as revolving fund 3. Improvement of Non-descript Breeds through Artificial Insemination
Action Details Ø Up gradation of large number of nondescript breed animals through free AI --
replacement of such a large flock would be costly & impossible in the short run Ø Promotion of artificial insemination Ø Supply of progeny-tested bulls for natural service (union council level)
4. Strengthening/up gradation of Semen Production Units
Action Details Ø Training of the staff for quality semen production and handling Ø Increased budgets preferably as revolving fund of semen production units Ø Special allowance for the technical staff working in semen production units Ø Regular availability of liquid nitrogen
5. Development of Beef and Mutton Breeds
Action Details Ø Study of beef production potential of local breeds Ø Development of local beef and mutton breeds
120
6. Promotion of Balanced Feed for Milk Production
Action Details Ø Promotion of balanced feed using mass media and demonstration through model
farms 7. Fodder and Rangeland Management Action Details
Ø Development of high yielding hybrid fodder varieties with improved nutrition and digestibility
Ø Training of the communities for improved rangeland management through participatory approach
E. Actions Proposed for Reduction of Post Harvest Losses 1. Improvement of Post Harvest Handling Technologies
Action Details Ø Development/improvement of post harvest technologies Ø Promotion of these technologies through mass media and training of the farmers Ø Training of the trainers
2. Development of Cold Chain and Transport Infrastructure
Action Details Ø Investment in cold chain infrastructure needs to be encouraged through:
o Provision of credit o Subsidized electricity as in case of agriculture o Provision of required infrastructure (Gas/Electricity etc) o Duty free import of machinery o Tax rebate o Technical guidance and training o Subsidy on alternate energy sources for cold storage in remote production
area Ø Multipurpose/multi chamber cold storage with facilities of temperature and humidity
control need to be built in major markets and production areas 3. Improving Shelf Life of Fruits & Vegetables
Action Details Ø Improving shelf live and desirable quality of mango and other important horticultural
crops [Genetic engineering can play an important role for transfer of desirable genes] F. Actions Proposed for Improving Quality of Agricultural Products 1. Establishment of a Quality Control System for Agricultural Products
Action Details Ø Establishment of a quality control system for agricultural products consisting of the
following § Multipurpose labs for grain/other product testing § Residue testing labs
121
Ø Establishment of a proper system for quality testing of agricultural products consisting of grain testing and residue testing labs
Proposed Types and Locations of labs Province Grain Testing Residue Testing Total
Punjab 3 3 6
Sindh 2 2 4
NWFP 1 1 2
Balochistan 1 1 2
AJK 1 1 2
Total 8 8 16
G. Proposed Actions for Enhancing Productivity of the NARS 1. Human Resource Development for National Agricultural Research System
Action Details Ø Doctoral and post doctoral training program in agricultural sciences
§ 100 Ph. D trainings from reputed foreign universities each year for the next 10 years -- at least 200 in molecular biology
§ Post doctorate trainings for 50 % scientists with Ph. D and of less than 50 years of age
2. Access to Digital Library Facilities
Action Details Ø Extension of Peri Digital Library Program of HEC to PARC/NARC as well as
provincial agricultural research institutes
3. Upgrading of Laboratory Facilities
Action Details Ø Upgrading of laboratory equipments at agricultural research institutions and
universities Ø Training of technicians for operation and maintenance of lab equipment
4. Service Structure for NARS Scientists Similar to PAEC
Action Details Ø A service structure similar to PAEC be applied for scientists working in all research
organizations Ø Enhanced salaries in the light of forth coming recommendation of the new pay
commission Ø NARS institutions be give more autonomy
H. Actions Proposed for Exploitation of Potential in Fisheries 1. Strengthening of Fisheries Research
Action Details Ø Establishment of fisheries research institute in Sindh and Balochistan
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Ø Up gradation of fisheries research institutes at the federal level and in Punjab and NWFP as Center of Excellence in Fisheries Research
Ø 40 M. Sc and 10 Ph. D trainings in fisheries
2. Improving the Quality of Fish Seed
Action Details Ø Production of quality seed for important fish varieties in sufficient quantities Ø Training of the technical staff working at hatcheries especially the private hatcheries Ø Funding for purchase of equipment and increased budget for fish seed production
preferably as revolving fund 3. Aquaculture and Cage Culture for Shrimps
Action Details Ø Aquaculture and cage culture of shrimps along coastal areas and Indus delta Ø Shrimps hatchery needs strengthening with staff and funds Ø Shrimps breeding season (June and July) be strictly observed as closed for harvest
4. Use of Brackish Water for Fish Production
Action Details Ø Development of production technology for brackish water aquaculture
[Some variety of fish can be profitably raised in brackish water] 5. Development of Fish Feed
Action Details Ø Development of proper fish feed for accelerated growth of fish Ø Development of prototype of fish feed mill Ø Commercialization of developed feed
I. Proposed Actions for Exploitation of Potential of Agri. Biotechnology 1. Development of High Yielding Varieties Resistant to Biotic and Abiotic Stress
Action Details Ø Development of high yielding varieties resistant to biotic and abiotic stress for the
following crops: - wheat - rice - cotton - sugarcane - vegetables - pulses - fodders
Resistance: pests [insects, diseases, viruses]
Tolerance: drought, heat, and salt
Why major crops? § Important from food security and export point of view § Most area is under major crops (2/3 of cropped area). Wheat alone accounts
for 75 % of rabi acreage.
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⇒ High growth in agriculture is extremely difficult without growth in major crops at least in the short run § Oilseed and other minor crops compete for area and inputs with major crops -- high
growth in these crop mainly depends on release of resources from the major crops
⇒ Possible only through enhanced productivity in major crops 2. Production of Virus Free Seed through Tissue Culture
Action Details Ø Tissue culture technology be used to provide virus free plants or micro propagation
of plants that grow slow or do not yield seed
Production of: Ø Virus free seed for potato Ø Virus free banana plants, dates, grapes, and other fruit plants Ø Micro propagation of disease free sugarcane saplings, medicinal plants, cut flowers etc.
3. Development of Effective Bio-Fertilizer
Action Details Ø Development of effective bio-fertilizer for solubilization of bound phosphorus, able
to tolerate drought/high temperature and salinity [Bio-fertilizers improve availability of nutrients to crop plants and with no adverse effects]
4. Search of Novel Bio -Pesticides
Action Details Ø Search of novel bio-pesticides with improved efficacy, potency and increased shelf
life need to searched [Bio-pesticides are target specific and do not leave harmful residues]
4. Development of Genome Maps
Action Details Ø Development of linkages maps for important crop plants
5. Strengthening Plant Genomic Research
Action Details Ø Establishment of Genomic Research Centers at NIBGE, Faisalabad; CEMB, Lahore;
HEJ/KIBGE, Karachi, and QAU, Islamabad J. Actions Proposed for Development of Milk Processing 1. Milk Chilling Units at Village Level and Use of LPS for Milk Preservation in Remote Areas
Action Details Ø Revolving fund for chillers at village level in major production areas --private-public
partnership 50-50 basis-- managed by dairy industry/farmers cooperatives with adequate training
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Ø Use of FAO/WHO approved Lactoperoxadise System (LPS) for milk preservation in remote areas
[Uninterrupted and subsidized electricity supply for electric chillers or provision of generators is a must]
2. Promotion of Demand for Processed Milk and Powder Milk
Action Details Ø Creating demand through programs like food for school children in selected areas Ø Education of the consumers through mass media about health effects of the
unprocessed milk Ø Product diversification -- more variety/flavors and more products -- especially
medicinal products (colostrums develop immunity in young stocks) Ø Reduce production cost through declined duty on products or machinery used in milk
processing or in packaging industry Ø The selling of the unprocessed open milk should be banned in selected cities by 2010
and a complete ban in other parts by year 2015
K. Proposed Actions for Development of Vegetables & Fruit processing 1. Establishment of Certification System for Nursery Plants
Action Details Ø System of certified plants need to established for providing disease free plants of
right species Ø Replication of Swiss supported project for production of certified plants for
horticulture promotion (Swat, NWFP) in other provinces
§ Foundation plants be provided by horticulture research institutions § Technical guidance by research institutions and FSC&R § Credit incentives § Revolving funds § Training for staff of private nurseries
2. Establishment of Irradiation Plants
Action Details Ø Irradiation (gamma rays) can be used to kill all living organisms without any damage
to quality of fruits and vegetables. It will extend shelf life. Ø Establishment of radiation pants at Karachi, Multan, Sarghodha, Lahore, Peshawar,
and Quetta
3. Development of Grading and Packaging Capacity
Action Details Ø Promotion of grading and packing industry in major production areas
§ Cardboard packaging for fresh fruit and vegetable produce § Tin cans, glass bottles, and multilayer tetra packs for processed products
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Incentives: • Credit • Duty free imports of grading &packing machinery and raw materials • Tax rebate • Technical training for operation and maintenance of grading and packing machinery • Promotion of demand for processed fruits and vegetables • Consumer awareness
Annexure: 5.22
PSDP Financial Allocation for Agriculture (Rs. in Million)
Period Total S&T HRD/ Skill
2005-06 8017 4146 3871
2006-07 11825 6047 5778
2007-08 16509 7877 8632
2008-09 22654 9746 12908
2009-10 29117 11638 17479
Total 88122 39454 48668
2010-11 35448 12927 22521
2011-12 38524 14119 24404
2012-13 41284 14957 26327
2013-14 44253 15931 28322
2014-15 47294 16916 30378
Total 206803 74850 131953
2015-16 50129 17806 32323
2016-17 52971 18686 34285
2017-18 55970 19610 36360
2018-19 59131 20582 38549
2019-20 62348 21617 40731 Total 280549 98301 182248
Note: The figures for 2005-06 to 2009-10 may not exactly be equal to the total cost of the projects because of throw forward.
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CHAPTER 6
TEXTILES
Musleh ud Din
The textiles and clothing sector is the mainstay of Pakistan’s economy. With a 24 percent share in the value added of the manufacturing sector, the textiles sector employs 38 percent of the workforce in the industrial sector, and constitutes roughly 70 percent of total exports. In the rapidly changing global economic environment, there is an urgent need to strengthen the competitiveness of the textiles sector. This chapter highlights the issues and challenges in the textiles sector, specifies strategic objectives and targets, and spells out an action plan for implementation. The textiles sector is facing a number of challenges including a low technological base, lack of research and development, lack of trained manpower, low quality standards, concentration in low-value added products, and too much reliance on cotton. To address these challenges and to facilitate the transformation of the textiles sector into a strong, dynamic, and internationally competitive industry led by the private sector, the public sector must create an enabling environment through a business friendly regulatory framework, appropriate incentives to the private sector, institutional support and provision of quality infrastructure.
The chapter recommends an action plan aimed at: improving the regulatory and policy framework; human resource development through improving the HRD institutions and encouraging the private sector to invest in skill enhancement; promoting research and development through strengthening of the existing institutions and establishing new institutions in the areas of garments, knitwear, sample development, and CAD/CAM centers; technological up-gradation; rewarding value addition; ensuring quality standards; and establishing common facility centers.
6.1 INTRODUCTION
The textiles and clothing sector is the mainstay of Pakistan’s economy. With a 24 percent share in the value added of the manufacturing sector, the textiles sector employs 38 percent of the workforce in the industrial sector, and constitutes roughly 70 percent of total exports. In the rapidly changing global economic environment, there is an urgent need to strengthen the competitiveness of the textiles sector. Emphasis should be placed on the promotion of new products and processes to enable the industry to compete both domestically and internationally. To become a global player, the textiles and apparel industry group needs to improve product quality, move up the value chain, lay technological foundations, and strengthen global business operations. This transformation will have to take into cognizance the heightened global competition in textiles trade after the phasing out of the MFA. 6.2. ISSUES AND CHALLENGES
6.2.1 Low Technological Base To a large extent, all segments of the textile sector from cotton cultivation to manufacturing of garments lack modern technology. Contamination in cotton resulting from improper picking and storage processes affects the cotton quality and is a major impediment in value addition. The technology deployed in cotton ginning is outdated, inefficient and based on local manufacturing by semi-literate mechanics. The level of technology in the spinning industry is generally satisfactory and most of the industry is using state-of-the-art machinery. However, since the industry has suffered due to bad cotton crops in the nineties, it has not been able to fully meet its BMR requirements.
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The weaving of synthetic fabric is done mostly on low technology power looms, with the inherent weakness of producing low quality fabric. Additionally these machines have limited capability to handle complex fabric constructions. The competitors such as Turkey, Indonesia and Korea have invested heavily in the latest water jet weaving technology which has helped them capture and sustain the market share in the global exports.
The global trade in artificial and synthetic fabrics is more than that of the cotton and blended fabrics. The competitors like Korea and Indonesia have developed this sector, realizing the important role of synthetics in the years to come. The drawback of this sector is lack of modern technology. In order to compete internationally, modern water jet weaving machines, with the capability to manufacture diverse qualities of fabrics are needed.
The production of fabric is dominated by the power loom sector, which accounts for almost 63% of the total production. The manufacturing capability of these machines is limited to the production of low-density fabrics. The processing industry is characterized by inefficient production processes leading to high wastage percentages. About 50% of the total installed processing capacity is more than fifteen years old and needs to be upgraded so as to enable it to cater to the growing demand of made-ups and high quality garments.
Further value addition through producing fabric that is required by the apparel sector is not possible unless there is a technology shift. The wider width high-speed shuttle -less looms have the capability of producing high-density fabrics. Modern air-jet and projectile looms are equipped with Computer Aided Manufacturing (CAM) facilities that enable the machine to handle complex fabric constructions without compromising quality.
The process of dye fixation is the single most important requirement for quality consistency. However, due to the absence of “continuous bleaching” process, problems are encountered in achieving homogeneity in the dyeing process. Better machines and workers trained on these machines will ensure consistent quality, which cannot be expected from the existing facilities.
The towel industry is largely us ing locally manufactured power looms. Only 8.5% of the total production comes from auto looms, which are better than power looms in terms of production capacity as well as product quality. A locally manufactured power loom produces 1000 kg of towels per month, whereas an imported auto loom produces 3500 kg of towels per month. Towels produced on auto looms fetch comparatively higher price in the international market. Very few units use shuttle -less and air jet looms for weaving towels.
The existing processing facilities in the towels segment are not equipped to produce better quality products. Most of the processing of towels is done in open winches in a batch fashion. The quality of processing obtained from this process is inferior to the one obtained from continuous processing. There are very few continuous units in the towel industry, thanks to the dominance of small and medium sized units in the towel industry resulting in low production volumes that do not justify processing on a continuous unit.
The garments sector is characterized by limited design and product development capacity, high process losses, and inadequate investment in modern pattern making and cutting equipment. The growing number of new styles and collections required each year demands shorter lead times from design to sample, through to manufacturing and delivery require modern technology. As far as the consumer is concerned, an increased awareness of and requirement for qualities such as individual sizing and fit, patterning and coloration are beginning to appear alongside an established interest in new fabrics and garment styles. Recent technological developments in the garments sector have been in response to the growing consumer demand for new styles and improved quality products. For example, technologies such as Computer-Aided-Design and Manufacturing (CAD/CAM) are widely used across the globe. However, Pakistan still lags behind in the utilization of such technologies.
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6.2.2 Lack of Research and Development
There have been little research and development efforts in the private sector. There are a number of research institutions in the public sector in the area of textiles. However, their research output has not benefited the industrial sector not least because of the lack of effective links between research organizations and industry. 6.2.3. Issues in Human Resource Development
A number of institutes have been established which cater to the human resource requirements of various segments of the textiles industry. The industrialists believe that the standard of the training programs carried out by these institutions is not in line with the requirements of the industry. The reason for this is lack of coordination between the institutes and the industry. The success of such institutes depends upon constant interaction and an effective feedback mechanism between the two. It is for this reason that most of the public sector initiatives established in isolation from the industry have not succeeded in achieving their objectives. The existing institutions are in need of restructuring to up-date their syllabus and upgrade the training equipment.
The processing (dyeing, printing and finishing) industry is still dominated by dyeing masters who have not received formal training in the field; they have developed their skills through years of experience. Furthermore the training institutions focus on cotton-based yarns and fabrics, whereas the changing international trends require the textile professionals to have up to date knowledge of synthetic and artificial filaments, and their weaving/knitting and processing. A systematic evaluation of the performance of the training institutes has been neglected for a long time and has begun to receive attention only recently. There exists a wide discrepancy in quality of education provided by different institutions, even in the same subject. Absence of a quality assurance mechanism is the main cause of deteriorating education standard of a majority of textile institutes.
The industrialists consider training as an unnecessary expenditure on their workforce, which ultimately causes problems for them to retain their labor and managers. Hardly any textile industrialist in Pakistan invests in training of its human resource.
The training institutions generally cater to the industrial requirement for middle level management. There is however a huge shortage of facilities to enhance labor skills and produce competent supervisors who have in-depth knowledge of processes and hands-on experience. Consequently, the skills of the labor force are primarily developed through the process of learning by doing in almost all the sub-sectors. Diversity in technology and the nature of textile sub-sectors demands specialized sets of skills in the work force. Each sub-sector has its own issues and requirements of human resource development.
6.2.3.1 Spinning Industry
Spinning is a capital-intensive process: a project costing Rs.350 million or more employs around 500 persons. Mostly the spinning sector labor force is trained through informal on the job training. The floor supervisors serving as Ustaads hire apprentices, who get trained in their respective disciplines. Although the spinning industry does not rely on the training institutes to meet their labor force requirements, the process managers in different sections are qualified professionals, mostly degree holders in textile engineering with specialization in the spinning industry. With the increasing competition in global markets, the success of the spinning industry depends on its ability to adopt modern processes to improve product mix by shifting to higher count yarns and adding further value through use of modern processes. This would require better-
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equipped labor force capable of handling these processes; simultaneously the managers will also have to undergo skill enhancement processes to meet the upcoming challenges.
6.2.3.2 Weaving Industry
Weaving industry in Pakistan can be divided into two segments based on the level of technology. The power loom sector is the labor intensive sector where the machine operators get on the job training through the Ustaad-Shagird system. Middle level management is non-existent in this segment; the entrepreneur himself is the manager. The machine operators in this segment do not obtain any formal training. The other sector comprises of shuttle -less weaving machines. This capital intensive process segment also does not rely on the formal institutions for the provision of manpower. Some of these units have supervisors trained at vocational institutes and the floor managers are textile professionals. Recent developments in the weaving technology require the operators and managers to be familiar with electronic gadgets attached to high speed machines including CAM (Computer Aided Manufacturing). Skill enhancement would require increased usage of computer based systems to monitor and manage productivity and quality.
6.2.3.3 Knitting Industry
The human resource requirements in the knitting industry are very similar to those in the weaving industry. The labor force is dominated by the individuals without any formal training. Due to the small size of operations, supervisors usually serve as floor mangers.
6.2.3.4 Dyeing and Finishing
The dyeing industry also consists of two segments: one using old techniques of winch dyeing and the other using state of the art continuous dyeing process. In both the industrial segments skills and expertise are of crucial importance. In the developed countries dyeing process is carried out under the supervision of dyeing experts who possess proper training and sound understanding of a diverse range of disciplines including chemistry, fibers and mechanical engineering. The complex process of dyeing can only be handled by experts having sound knowledge acquired through academic and practical training. On the contrary, in Pakistan the dyeing process is managed by dyeing masters who have acquired their skills by working in a dyeing facility. These dyeing masters operate on hit and trial basis without any scientific methods. The new trends and modern developments particularly new finishing processes, which require special treatments to fabrics and value addition, can only be successfully adopted through imparting training to existing manpower. Immediate training needs can be fulfilled by creating awareness among the industry and training of the existing workforce comprising of the dyeing masters.
6.2.3.5 Apparel Sector
The apparel sector has not been able to exploit its potential in the international market due mainly to shortage of skills in apparel designing and stitching. The highest value addition in the textile sector can only be achieved through the development of manpower, equipped with the requisite skills to enable the country to compete in international markets.
The increasing global competition in the field of apparel requires the local apparel industry to gear itself to improve quality of the fashion garments and accessories. The high rate of growth in the international clothing market makes it inevitable for Pakistan to further increase human resource investment in the field of garments and fashion design. The existing number of graduates per year is too low to achieve a quantum leap in apparel exports through capturing medium to high-end markets.
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6.2.4 Low Quality Standards
The low quality yarn and the use of poor weaving technology (power looms) are the main causes of all the fabric defects. While factors such as weaknesses in back process and working conditions in the weaving facilities are of secondary importance in fabric quality. Similarly there are no proper standards and identification systems for the evaluation of fabric being exported.
The fabric manufactured on power looms simply cannot meet the JIS standards. The rejection rates based on these standards are as high as 25% in the power loom sector. Up-grading the power looms with an automatic cop changer can control the number of mechanical defects and the fabric rejection rate drops to 13%. However, weaving of fabric on advance shuttle -less machines: projectile, rapier and air-jet looms the state of the art weaving machines are the only ways to improve the fabric quality.
The dyeing and finishing sector is also characterized by poor quality. The smaller units mostly use locally manufactured machinery, which does not have the capability to achieve the desired fabric shade or finish. About 50 percent of the processing industry's capacity is based on over 15-years old machinery and require replacement. Declining demand for low count yarn and increasing export market demand for finished fabrics make it necessary for the industry to modernize its processing base. The industry must make considerable investments in bleaching, dyeing, printing and finishing machinery to catch up with its competitors.
6.2.5 Production skewed towards low end Commodities
Due to the capital intensive nature of the high tech machines in the manufacturing of woven fabric, the focus of the local textile entrepreneurs has, in the past, remained on the power looms; the quality has been ignored all along. Because of the poor quality, its fabrics fetched unit prices well below the average international unit price. For example, Pakistan has the lowest unit price realization for bed-linen as compared with its competitors. For other products also, Pakistan is targeting lower market range. Countries having higher unit prices are mostly European and their prices are more than double than those of Pakistan. 6.2.6 Low Value-Added Pakistan’s exports of textiles are concentrated in low value added products despite a rising share of higher value added textile products in global trade. In the category of blended fabrics with more than 85% cotton, the value addition is very low as 54% of the total fabric is exported without any processing, result ing in a low unit price realization. 10 To capture a greater share in the rapidly expanding global market for high value added textile products, the textile industry must move up the value chain and increase the share of high value added garments and made-ups in its export portfolio. 6.2.7 Too Much Reliance on Cotton
The textiles sector in Pakistan remains largely cotton-based, despite an increasing trend towards synthetic and blended fabrics. Current spindles utilization for manmade fibers is very low compared with its competitors. Major reason for this is the protected manmade fibers industry. Import duties on manmade fibers make the raw material expensive for the spinning industry thereby making it non-competitive in yarn export market. Blended yarn sold in the local market at higher prices compared to international prices erodes the competitive edge of the weaving industry also. The overwhelming reliance of the textile sector on cotton makes it vulnerable to adverse shocks in the cotton market. In order to decrease the reliance on cotton, there is a need to encourage a shift towards manmade fibers.
10 The extent of value addition is much higher in the case of blended fabrics with less than 85% cotton: 92% of exports of such fabrics are processed domestically.
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6.3 STRATEGIC OBJECTIVES AND TARGETS
The objectives of the development strategy for the textiles sector are to:
a) Facilitate the textile industry to attain and sustain a pre-eminent position in the manufacture and export of high value added and high quality textile products in an era of freer international trade.
b) Revitalize the institutional structure to strengthen human resource skills and capabilities.
c) Encourage research and development to enable the industry to build cutting edge manufacturing capabilities.
d) Enable the industry to move into a higher technological orbit.
e) Liberalize controls and regulations so that the different segments of the textile industry are able to perform in a greater competitive environment.
f) Develop a strong multi-fiber base with emphasis on product up-gradation and diversification.
g) Encourage the active involvement of both the private and the public sectors in attaining these objectives.
h) Attain double digit growth in the production and exports of textiles on a sustained basis.
i) Achieve and maintain a position among the top five textiles exporters in the world.
6.4 ACTION PLAN
To facilitate the transformation of the textiles sector into a strong, dynamic, and internationally competitive industry led by the private sector, the public sector must create an enabling environment through a business friendly regulatory framework, appropriate incentives to the private sector, institutional support and provision of quality infrastructure. 6.4.1 Improving the Regulatory and Policy Framework 6.4.1.1 Regulatory Framework
Cumbersome procedures of government departments and the difficulty of dealing with a number of government agencies have been identified as major problems facing textiles exporters. For example, exporters have to deal with more than forty government departments, each having its own individual documentation requirements. The excessive procedural requirements not only raise the transactions costs of exporters but also impede their access to the benefits offered under various incentives and export facilitation schemes. It is, therefore, essential to streamline the regulatory framework to provide a hassle -free environment to the exporters. 6.4.1.2 Trade Policy
About 80% of the textile production is export oriented. On the other hand, the textile sector relies on a variety of imported raw materials ranging from man made fibers to dyes and chemicals. Therefore, a liberal trade regime for the textile sector is proposed. This would ensure the availability of imported raw materials at competitive prices to all segments of the textile industry.
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6.4.1.3 Technology Import Policy
Textile sector in Pakistan is mostly at the lower end of the technology spectrum. Concerted efforts will have to be made towards moving the industry into a higher technological orbit to produce value-added goods that are competitively priced in the international markets. To enable the industrialists to up-grade their technology, import of new machinery and equipment should be exempted from import duty and sales tax. In addition, keeping in view that not all manufacturers may have the necessary resources to invest in brand new machinery and equipment, import of second-hand textile machinery may be allowed. 6.4.1.4 Tariff Rationalization
The textiles industry uses a range of imported inputs from synthetic fibers to dyes and chemicals. High tariff protection is being provided to the domestic producers of these inputs, thereby eroding the competitiveness of the textiles sector.11 For example, despite a growing global demand for blended fabrics, Pakistan has not made any significant headway in this area, thanks to import duties on synthetic fibers which make the raw material expensive for the spinning industry. In this scenario, the recommended approach is to phase out the import duty on man made fibers. To compensate for the loss of tariff protection, the domestic synthetic fiber industry should be provided fiscal incentives such as tax holiday and accelerated depreciation allowance. In addition, there are many manmade fibers that are not manufactured in Pakistan and spinners have to import these fibers. Import duties on such fibers should be removed completely.
Recent years have witnessed a great increase in the demand for blended fabrics and garments, as the fashion trends have changed in favor of blended garments. The global demand for ‘performance wear’, which includes water, fire, chemical and wrinkle resistant garments, is also increasing rapidly. Blended garments require a higher level of fabrication skills and thus fetch a higher value in the global markets. Rationalization of tariff structure for man-made fibers would go a long way towards enabling the textiles industry to exploit the opportunities offered by this dynamic sector.
Higher tariffs imposed on dyes and chemicals to protect domestic producers seriously affect the textiles processing industries by raising their cost of production.12 This problem has been compounded by the restrictions of Azo dyes in EU and USA, that have forced the processing industry to switch to costly European dyes and chemicals. To ensure the availability of these inputs to textiles producers at competitive prices, protection provided to domestic producers of these inputs be gradually withdrawn, eventually to be replaced by fiscal incentives if needed. Dyes and chemicals not produced domestically should be allowed to be imported free of duty. 6.4.2 Human Resource Development
The problems of low productivity and poor product quality can only be addressed by improving the quality of human resources. There are a number of institutions that are involved in imparting higher education in the field of textiles. While these institutions have been instrumental in meeting the human resource requirements of the textiles industry, there is a need for a significant improvement in the quality of education. In addition, the private sector needs to be encouraged to invest in on-the-job training to upgrade the skills of their manpower. 11 To mitigate this problem, a temporary importation scheme is in place, but it has not benefited the textiles producers owing to procedural snags. 12 Import of cheap chemicals from countries like India and China, coupled with improper controls, result in variation of shades, inconsistency in quality, and high rejection rates.
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6.4.2.1 Improving HRD Institutions
The performance of the existing institutes has been marred by a number of factors including: shortage of highly qualified faculty; out-dated training equipment; a syllabus that has not kept pace with recent technological advances; absence of networking among the academic institutions; and absence of links with the industry. There is therefore, an urgent need to revamp the education system to improve the quality of manpower. The following measures are recommended:
a) Attract highly qualified faculty through market-based rewards.
b) Revise curricula based on industry needs and recent advances in product and process technologies.
c) Upgrade the existing training facilities and equipment.
d) Introduce a strong system of quality control and supervision to ensure that minimum standards are being met.
e) Provide hands-on experience to the graduates by making it compulsory for them to serve as interns with the industry for at least 6 months.
f) Promote networking among the educational institutions.
g) Conduct regular surveys and public -private consultations to identify the manpower attributes required by manufacturing firms in terms of knowledge and skills, and then communicate their manpower needs, in quantity and quality terms, to the educational institutions.
6.4.2.2 Encouraging the Private Sector to Invest in Skill Enhancement
On-the-job training is essential for enhancing the skills of the workforce in line with market trends. In Pakistan, however, industrialists seldom invest in training and upgrading the skills of their manpower. To encourage entrepreneurs to invest in human resource development, they may be provided tax credit for expenditure on manpower training. Also, firms that establish technical or vocational training institutions should be eligible for tax deduction out of its taxable income.
6.4.3 Promoting Research and Development
Attaining competitiveness requires research and development activities focused on improving operation and maintenance of production facilities, product quality and designs, and process technologies. While there has been little research and development activity by the private sector, the public sector institutions have not been able to deliver either. There is, therefore, a need for a two-pronged strategy to promote research and development in the textiles sector. First, the public sector institutions need to be strengthened to provide market driven R&D support to firms. Second, the private sector needs to be provided incentives to invest in research and development. These may include tax exemptions on expenditure incurred on R&D activities as well as provision of matching grants for specific R&D projects. 6.4.3.1 Strengthening Existing Institutions
A few institutions are involved in research and development in the textiles sector, but the research carried out by them is ‘supply driven’; research is performed according to the interests of the researchers rather than to meet the needs of the users. Other problems afflicting the public R&D apparatus include shortage of high-caliber researchers, ill-equipped research facilities, and
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lack of effective links with the industry. The following steps are needed to strengthen the existing institutions:13
a) Attract highly qualified researchers through market-based rewards.
b) Researchers should be provided 100% tax exemption on the income that they receive from the commercialization of their research findings.
c) Create liaison offices to maintain links with the industry.
d) Encourage research that caters to the need of the industry.
e) Upgrade the lab and training equipment.
6.4.3.2 Establishing New Institutions
a) Ginning Research Institute: There is a need to set up a Ginning Research Institute. This institute will provide the much needed institutional support to the ginning industry in Pakistan. A proposal PC-1 for such an institution has already been submitted to the ministry for approval.
b) Textile Processing Institute: In view of the lack of training facilities in textiles processing, there is a need to establish a training institute in this segment. This facility should be set-up through a joint effort by the public and private sectors with an active role of the Technical and Vocational Training Authority (TEVTA). After its establishment, the management may be handed over to the industry.
c) Sample Development Labs: To reduce the lead time in sample development, there is a need for the establishment of small commercially managed dyeing, printing and sample development labs. The necessary instruments/machinery required for such labs should be allowed to be imported duty free, so that these could be established with minimum costs and could provide a backup and regular support to the industry. Such labs will also play an important role in supplementing R&D efforts in fabric development, blends development, colorizations, patterns development, design developments etc.
d) Garment Technology Center: Pakistan needs to develop capabilities in the garments sector— the highest value-added segment in the textiles chain. For this purpose, there is a need to establish a garments technology center at the National University of Textiles, Faisalabad. This center would play a pivotal role in developing and disseminating garment design and process technologies.
e) Knitting Technology Center: Despite a growing trend in the global market towards knitwear, little attention has been paid to this sector. To develop the knitwear sector in Pakistan, there is a need to establish a knitting technology center at the National University of Textiles, Faisalabad. By providing the necessary product and process technologies, this center would go a long way in enabling the domestic entrepreneurs to capture a larger market share in the growing trade of knitwear.
f) CAD/CAM Center: To promote the use of computer aided design and manufacturing facilities, there is a need to establish a CAD/CAM center at the
13 The Pakistan Council for Science and Technology has already launched a program to make the existing R & D institutions more responsive to the industry needs.
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National University of Textiles, Faisalabad. This center would be instrumental in promoting computer aided design and manufacturing in all segments of the textiles sector.
g) Yarn Research Center: To help in the assimilation and adoption of latest
spinning technologies including friction spinning and air-jet spinning. h) Micro-fiber Technology Center: To develop technical textiles for medical
applications as well as for aerospace, sports, environmental and other special industrial uses.
i) Weaving Technology Center: To help in the assimilation and adoption of latest
weaving technologies including air-jet and projectile looms and water-jet weaving technology for synthetic fibers.
j) Textiles University: To provide the necessary human resource base that would
support a fast growing and modern textiles sector.
6.4.4 Technological Up-gradation
Despite global technological advancements, the textile sector in Pakistan is mostly characterized by the use of low-tech production facilities. The need for technological up-gradation is particularly acute in the weaving industry and garments and made-ups sections. The objective of manufacturing high value-added and superior quality products that can compete in international markets can not be realized without the up-gradation of technology in all segments of the textiles industry. Since the lack of funds for investment in new technology has been identified as a major constraint in technological up-gradation, a technology up-gradation fund is proposed that would provide long-term financial support for the installation of modern machinery and equipment. 6.4.5 Building Technological Capabilities
The product and process technologies employed in the textiles sector have been mostly acquired from the industrialized countries. However, studies suggest that industrial growth relying on technology acquisition only misses out on a very large source of enhanced productivity growth and competitiveness through the development of domestic technological capabilities. Policies to strengthen technological capabilities need to focus on two areas: policy measures to strengthen the capabilities and activities of firms concerned with undertaking their own technology development; and policy measures to strengthen support institutions in undertaking scientific and technological activities for the benefit of industrial firms. 6.4.5.1 Firm-based Technology Development
The fast growing Asian economies like Korea, Taiwan, Singapore, etc. have promoted firms not just as users of advanced technologies but as creators of technology and generators of skills and capabilities to do so. In these countries, as well as in more technologically advanced countries, firms now account for the larger proportion of industrial technology development.
There are at least four factors that are essential to nurture a firm-based technology development system: competition, effective demand from firms, a production structure based on the production of technologically advanced products and processes, and foreign direct investment.
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• Competition generates the pressures and opportunities in both domestic and export markets, and stimulates investment in technology development.
• The majority of firms in developing countries do not realize or recognize the need for change and do not know where and what they might improve. On the other hand, firm may recognize the need for change but are unclear how to go about it.
• Industries differ in the intensity of their technology development activities. Industries that are growing rapidly in world trade offer greater opportunities for deepening local technological development capabilities. Domestic production of more technologically advanced products and processes is the necessary base, though not sufficient, upon which to build incremental design and engineering changes. Technology development has to be undertaken in close proximity to where production and marketing operations are located.
• In industrialized and industrializing countries, the roles and strategies of MNC subsidiaries and joint venture partners seem to be shifting towards a greater localization of technology development activities. When MNC subsidiaries play a technology development role, they can develop spillovers to the rest of the economy. This opens up the potential for linking this process more strongly to local institutions and increasing the spillovers generated within the economy.
In view of the above considerations, efforts to foster a firm-centered structure of technology development need to focus on increasing competition, promoting effective demand for technology from domestic firms, shifting production towards more technologically advanced products, and attracting foreign direct investment. 6.4.5.2 Public Technology Institutes
A number of institutes are working in the public sector to promote the development of industrial technology in Pakistan. In addition, some universities also have science and technology research facilities. However, these institutes have had little or no impact in developing solutions to the technological needs of the textiles sector. These institutes suffer from a number of problems including: a bureaucratic structure and poor management; lack of vision; lack of adequate resources; lack of coordination and collaboration with other institutions; and lack of an effective mechanism to provide direct services to manufacturing firms. The system, therefore, needs a complete overhaul and streamlining with a view to meeting the requirements of the private sector in a more effective manner. 6.4.6 Rewarding Value Addition
To maximize the gains from the emerging global environment of increasing competition and lower trade barriers, it is imperative to move up the value chain both within and across all the sub-processes of the textiles sector. For example, there is a strong need to shift from the manufacture of low counts yarns to finer counts yarns on the one hand, and from clothing to garments and made-ups on the other. To reward value addition, incentives provided to the textiles sector should be linked with the extent of value addition, as, for example, access to subsidized credit to exporters of high value added products such as garments. Similarly, other incentives such as export refinance should be cascaded across the value chain within a sub-process e.g. lower refinance rate for the finer counts and other value-added yarns and higher rate for the lower counts. In addition, the import of modern machinery that is meant for achieving value-addition should be facilitated through the provision of subsidized credit.
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Garments are the highest value added exports in the textile sector. Even though exports of ready-made garments, have increased over time, they are still only US$2 billion that is much lower than potential. The unit values are still low and through better design, pattern, and brands, the value of exports may grow at a rapid rate. 6.4.7 Ensuring Quality Standards
The quality of final products depends on the quality of cotton and lint. Currently, there are no effective quality standards in place resulting in quality problems for the upstream industries14. Similarly, it is essential to implement quality standards for yarn. A Quality Control Authority needs to be established which should enforce minimum standards for phutti and lint, cotton yarn and cloth, and dyeing and finishing etc. The use of contamination detectors can reduce the risk of contaminated yarn going into further processing. The government should facilitate the availability of contamination detectors by granting duty concessions on the import of this equipment.
To ensure compliance with environmental standards, all the dyes imported into Pakistan should be certified by an international agency. While the global trade regime for textiles is being liberalized with the phasing out of the MFA, a major threat to exports from developing countries will be environmental restrictions imposed by developed countries. Importers in these countries have become increasingly conscious about dyes that can cause environmental or health hazards. Low cost but hazardous dyes should not be allowed in the country as this can cause severe long-term damage to the reputation of Pakistan as an exporter. The government should assist the entrepreneurs to obtain quality standards certification like ISO 9000 and ISO 14000 through ensuring better implementation of compliance related issues. 6.4.8 Encouraging Joint Ventures
In countries like Bangladesh and China, joint ventures with foreign manufacturers have proved to be effective tools for the transfer of technology and managerial and marketing skills. While foreign investment in all segments of the textile industry would be beneficial, a particularly promising area for establishing joint ventures is the apparel sector. Apparel manufacturing industry in Pakistan has been very slow to introduce new technologies especially in cutting and stitching. Collaboration with foreign apparel manufacturers would help bring in new technology and shorten the learning curve for the apparel industry. Export Promotion Bureau, the Board of Investment, and the newly established Textiles Board can play an effective role in encouraging joint ventures in the textiles sector. 6.4.9 Marketing Support
As most of the textiles industry is export-oriented, the government needs to assist the private sector in effectively marketing its products through improving image of Pakistani products in foreign markets and developing brand names. Pakistan's current image is of a ‘low quality, low price, non-consistent and unreliable supplier’. Unless this image is changed, textiles exporters would not be able to expand their presence in foreign markets. Effective representation of Pakistan in international product exhibitions and trade fairs can play an important role in building Pakistan's image as supplier of quality products. Developing brand loyalty is also a powerful marketing tool. However, despite having a strong export base in textiles, Pakistani firms have not invested in developing their own brands, not least because of the high outlays involved. The Export Promotion Bureau should be involved more actively in helping the private firms in
14 The government has established Pakistan Cotton Standards Institute (PCSI). However, the implementation of its cotton grading standards is weak.
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their endeavors to build image and brand name. Alternatively, a "Corporate Marketing Company" may be established to provide professional marketing support to the entrepreneurs. The company would be a joint venture between the private and public sector, and managed by the professionals.
6.4.10 Establishing Industrial Clusters
The textiles sector comprises a significant number of small and medium enterprises (SMEs). The formation of clusters would be beneficial for such SMEs because the former provide cost-effective solutions to deliver targeted technical assistance for upgrading technology, management and marketing. Experience in many countries has shown that industrial clustering leads to greater efficiency and flexibility not attainable by individual firms operating in isolation. For the textiles sector, industrial clusters may be established at Faisalabad, Lahore, and Karachi. 6.4.11 Establishing Common Facility Centers
Many small and medium enterprises lack modern design and production capabilities. To facilitate such enterprises, there is a need to establish common facility centers at Faisalabad, Lahore, and Karachi. By providing essential machining facilities and other common services, these centers would help in gaining greater competitive strength and developing collective efficiencies; and encourage cooperation between firms in upgrading technology, organizing consultative meetings, and disseminating information.
6.4.12 Establishing Co-operatives for Power/Auto Looms Sector
The power/auto looms sector is fragmented with an average unit size of 7-8 looms per unit. The small size makes it difficult for the operators to upgrade their processes and technologies and to take advantage of the supporting services provided by the public sector. It is, therefore, proposed that the informal sector should be supported through the formation of co-operatives i.e. common manufacturing facilities with multiple ownership. Such co-operatives may be provided easier access to credit and technical and marketing support services.
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BIBLIOGRAPHY Javed, Attiya Y. and Haseeb Ahmad Bhatti, “ How to Live in a Textile Quota-free
World”. The Pakistan Development Review, Volume 39, Part-II (Winter 2000), PIDE, Islamabad.
Khan, Munir A. (!996) “Textile Plants, Dyes & Engineering”. Prime Minister’s High
Power Committee on S&T, Sub Committees Reprots [Manpower/ Software/Defence etc.], Vol. 16-17.
Malik, Afia (2000), “Demand for Textile and Clothing Exports of Pakistan.” The
Pakistan Development Review, Volume 39, (Winter 2000) PIDE, Islamabad. Ministry of Planning & Development, Government of Pakistan, “Industrial Efficiency
Improvement and Development Strategy Study: Textile Subsector Report”. Volume 18, Technical Assistance Project Cell, Islamabad.
Din, Musleh-ud and Kalbe Abbas, “The Uruguay Round Agreement: Implications for
Pakistan’s Textiles and Clothing Sector”. The Pakistan Development Review, 38:4, Part II (Winter 1999) pp. 823-833, PIDE, Islamabad.
Small and Medium Enterprise Development Authority, “Textile Vision 2005”. Mid
Term Review, July 19, 2002. Small and Medium Enterprise Development Authority, “Textile Vision 2005”.
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Annexure 6.1 Suggested Projects in Textiles
Action Cost Time Agency Impact Developing Human Resources
Ø Attract highly qualified
faculty through market-based rewards.
Ø Revise curricula based on
industry needs and recent advances in product and process technologies.
Ø Upgrade the existing training
facilities and equipment. Ø Promote networking among
the educational institutions Ø Create liaison offices at
educational institutions to maintain links with the industry.
Ø Conduct regular surveys and
public-private consultations to identify the manpower attributes required by manufacturing firms.
Ø Establish a Textiles
University
Rs.100 million Rs.100 million Rs.800 million Rs.100 million Rs.100million Rs.100 million Rs.5 billion
Short-term Short-term Short-term Short-term Short-term Short-term Short to Medium term
HEC, APTMA HEC, APTMA MOST, PCST HEC HEC, APTMA PCST, HEC, APTMA HEC APTMA
Strengthen the knowledge base and thereby improve the efficiency of the work process. Technical knowledge and skills will reduce the process losses and improve efficiency. Save foreign exchange spent on hiring of foreign experts. Improved quality of education in line with industry needs. Improved productivity due to the availability of most desired skills in the workers. Provide human resources to support modernization of the textiles sector
Promoting Research & Development Ø Strengthen the existing R&D
institutions in terms of faculty and equipment
Ø Establish Ginning Research
Institute (already proposed but implementation required)
Ø Establish Textile Processing
Institute Ø Establish Dying, Printing
and Sample Development Labs
Rs.700 million Rs.500million Rs.500 million Rs.500 million
Short-term Short-term Short-term
MOST, PCST, APTMA PCST, TCO, EPB, APTMA TCO, EPB, APTMA
Improved product quality. Efficiency in production processes. Improved cotton quality will make exports more valuable and competitive. Improved quality of inputs and processes in the textile value chain, resulting into substantial increase in the exports of value added products like synthetic fabrics and ready made garments.
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Ø Research Center for yarn Ø Micro-fiber Technology Center
Upgrading Technology Ø Establish Garment
Technology Center at National University of Textiles
Ø Establish Knitting
Technology Center at National University of Textiles
Ø Weaving Technology Center
Rs.500 million Rs.500 million Rs.400 million Rs.400 million Rs.700 million
Short- term Short- term Short-term Short-term Short-term
TCO, EPB, APTMA TCO, EPB, APTMA HEC, Textile Board, APTMA
Increased export earnings through higher value added exports. Help capture high-end export markets Bridge the existing technology gap in garments and knitwear – sectors with high value added and strong growth potential. Enable the country to move into high value added exports with higher unit prices.
Common Facility Centers Ø Establish common facility
centers at Faisalabad, Lahore, and Karachi
Rs.2 billion
Short to Medium-term
Textile Board, EPB, APTMA
Help in developing collective efficiencies; boost textile exports by giving a competitive edge in the world market.
Increasing Value Addition Ø Establish a CAD/CAM
Center at National University of Textiles
Rs.400million
Short- term
HEC, Textile Board, APTMA
Increased value addition; Higher unit prices of textile exports; Increase in the profitability of the textile sector as well as of upstream industries.
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Annexure 6.2
PSDP Financial Allocation for Textiles (Rs. in Million)
Total S&T HRD/ Skill Period
1455 825 630 2005-06
1835 886 949 2006-07
2374 958 1416 2007-08
3167 1035 2132 2008-09
4556 1120 3436 2009-10
13387 4825 8562 Total
5725 1375 4350 2010-11
6167 1485 4682 2011-12
6643 1604 5040 2012-13
7127 1724 5403 2013-14
7620 1853 5767 2014-15
33282 8040 25242 Total
8187 1992 6195 2015-16
8768 2132 6636 2016-17
9314 2280 7033 2017-18
9929 2440 7489 2018-19
10486 2611 7875 2019-20 46684 11455 35229 Total
Note: The figures for 2005-06 to 2009-10 may not exactly be equal to the total cost of
the projects because of throw forward.
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CHAPTER 7
THE PAKISTAN LEATHER INDUSTRY
Ejaz Ghani
A strategy to improve the leather products through research and development on local production of chemicals and tanning machines, training of manpower in leather technology, facility for testing leather quality and products, promotion of shoe and garment industry through design and fashion institutes, low tariffs on imports; to achieve higher growth, incentives for setting up of industries for the manufacture of international quality trimming, accessories and component required by the leather industry; and technological up-gradation through joint ventures with leading international manufacturing houses is proposed. The environmental pollution caused by the tanning industry should be checked through imposition of strict environment regulations and local laws to curb the growing tannery effluent problems, R&D for tannery effluent management needs to be encouraged. Training on occupational health and safety, modern practices for handling chemicals, appropriate water conservation measures such as placing automatic stop valves on water supply pipes, converting from running after washing to batch washing, etc. should be adopted as appropriate; chemical re-cycling should be practiced; unrestricted access to the latest technology may be facilitated through lowered tariff measures; facilitation to recruit foreign experts etc.
7.1 INTRODUCTION
The leather industry has developed progressively since Pakistan's independence. Following partition from India, there were few tanneries and hides and skins were imported. However, the leather industry today has developed into an indigenous industry that is the second biggest export-oriented industry in the manufacturing sector and third in the overall exports of Pakistan. Although the production of hides and skins used in the tanning industry-- cattle, goat, sheep, and buffalo--has been steadily increasing, the supply has not been able to keep pace with demand.
Leather and leather products play a significant role in Pakistan economy. As the country is predominantly agricultural, it possesses natural advantage in the area of live stock population. The leather sector contributes around 5% to GDP and 7% to the total exports of the country. Major leather products produced in Pakistan include footwear, leather garments, leather gloves, handbags, purses, key chains, wallets etc. Around 60% of domestically produced leather is consumed by footwear industry and another 30% is shared equally by leather garments and upholstery industry. The remaining 10% is consumed in leather gloves, bags etc. The leather and leather product industry is employing around 250,000 workers.
Pakistan's leather industry is one of the major foreign exchange earners for the country. Almost 80% of production is exported and 90% of these in the finished form. During the year
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2002-03, the total exports of leather and leather manufactures were of $ 694 million and it is about 7% of total exports. The recent growth of the industry is mainly due to export of value added finished leather and leather manufactures like garments gloves, footwear and sports goods. The share of Pakistan in the global leather market is around $ 0.6 billion (3%) out of the total $ 20 billion; China is the leading exporter of leather with $ 8.0 billion exports.
7.2 INDUSTRY STRUCTURE There are 725 tanneries in Karachi, Lahore, Multan, Kasur, Faisalabad, Peshawar,
Gujranwala, and Sialkot, with the majority of leather production taking place in medium-size tanneries. The leather industry as a whole --including both tanned leather and leather garments is an important foreign exchange earner. The leather tanning industry produces about 6 million hides and 36 million skins annually. The leather industry in Pakistan is expected to grow rapidly and will double its output in the next ten years. Pakistan being an agricultural country has a great potential of growth and is considered to be an export-oriented sector.
Table 7.1: Structure of Leather Industry
Commodities No. of Indus trial Units
Total Capacities
Tanneries 725 Nos. 90 Mln. Sq Mtrs Leather Garments/Apparel 461 Nos. 7 Mln. Pcs Footwear 524 Nos. 10 Mln. Prs Leather Gloves 348 Nos. 200 Mln. Prs
Source: EAC, 2004.
7.3 ISSUES AND CHALLENGES
The chrome tanning method is the most widely used process in Pakistan's leather sector. However, the vegetable tanning method and a combination of chrome and vegetable tanning is also applied. The process includes a number of different steps during which large quantities of water and chemicals are applied to the skins. About 130 different chemicals are used in leather processing, depending on the type of raw material used and finished product. These may be divided into four major classes: pre-tanning chemicals, tanning chemicals, wet finishing chemicals and finishing chemicals.
Groundwater is used as the major source of water in Pakistan's leather industry. As the country is progressing towards industrialization, the rampant discharge of untreated effluents tanneries has been a growing problem. Pakistan’s export of tanned leather is on the increase following a decline of leather production in the developed world due to more stringent environmental controls. The increase of tanneries in Pakistan is causing severe environmental degradation as the untreated effluent used in the tanning process is released into nearby water reservoirs and in the sea. In addition, air pollution is on the rise with the tanneries burning residuals (i.e. hair) from the tanning process into the atmosphere.
The primary pollutants that leather tanning in Pakistan creates are heavy metals (chromium, cadmium, etc.), various organic chemicals, and acids. The government tested the effluent runoff from leather tanneries in Pakistan and verified that the discharges were toxic. The
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sample of tannery effluent contained .30 copper milligrams per liter, .15 cadmium milligrams per liter, 7 zinc milligrams per liter, 1.14 nickel milligrams per liter, and 1.8 lead milligrams per liter. These levels are almost all well above the suggested standard for toxic substance concentrations in effluent. Very few of the tanneries have any type of waste treatment facility and this runoff is released into the nearest drain or body of water such as the sea or a river. The effluent is uncontrolled by any process treatment, waste recycling, or end-of-pipe treatment.
7.4 SECTORAL ISSUES
7.4.1 Tanning
• High proportion of damaged local hides and skins due to diseases, improper slaughtering/preservation.
• Shortage of local hides and skins
• Compliance to environmental standards 7.4.2 Footwear
• Undeveloped industry
• Non availability of quality shoe components/accessories
• Lack of marketing linkages
• Lack of trained human resources
7.4.3 Garments/Gloves • Procedural impediments in import of raw material (finished leather and
accessories)
• Narrow product mix
• Lack of design/development facilities
7.4.4 Leather Goods • Undeveloped industry
• Low technological levels
• Lack of marketing linkages
7.5 STRATEGIES, OBJECTIVES AND TARGETS
While the government of Pakistan needs to promote the industry in the country, and simultaneously is a custodian to environmental protection, there is a need for national environmental legislation on the leather industry, local laws could be introduced to curb the growing tannery effluent problem. In fact, certain industrial areas are suffering greater environmental damage and would benefit from local legislation. For example, in Karachi, the Korangi Industrial Area has the largest number of tanneries working in the leather sector and is the most polluted area with "open drains and effluent being discharged without any treatment”.
The tanneries could benefit from R&D in order to not only cut down on polluting effluents, but also how to recycle many of the discharges. In addition, effluent treatment facilities need to be established in order to limit the environmental damage caused by the direct dumping of untreated effluent.
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A strategy for general remedial measures is presented below: • Short-term training on occupational health and safety, modern practices of handling
chemicals, etc. should be conducted for tannery staff and operators.
• Information about safety, health and environment should be visibly displayed in the workspace.
• The provision and use of safety items such as face protective shields, acid resistant gloves, aprons, masks, etc. should be strictly enforced.
• Careful monitoring of water use needs to be implanted. Appropriate water conservation measures such as placing automatic stop valves on water supply pipes, converting from running water washing to batch washing, etc. should be adopted as appropriate.
• The appropriate environment friendly technologies need to be adopted according to the particular needs and conditions of particular tanneries.
• Improvement in drainage system to avoid the formation of hydrogen sulphide gas inside the tanneries is suggested.
• Proper arrangements should be made to stop the use of tanned 'Solid waste in the preparation of poultry feed.
• Chemical re-cycling should be practiced.
It is observed that about 25% of the chrome that goes into wastewater can be reused. The liquor is almost free of chromium and contains most of the dissolved solids and other impurities. The chrome sludge cake can be dissolved in sulphuric acid to form tanning liquor which can then be reused.
7.5.1 Short Term Actions
• Latest plant & machinery is available in the international markets and can be purchased, shipped and installed in a short span of time. Unrestricted access to this may be facilitated through lowered tariff measures.
• To improve quality and increase value addition, recruitment of foreign experts may be facilitated through subsidy by the government or technical assistance programs offered by various international agencies.
• The policy of lowered tariffs would bring a change in relative prices of products across the chain, reallocate resources to greater production, technological innovation, new production structures and changing patterns of competition.
• For growth to be sustainable, time bound policies must be given to the industry. This would create an investment friendly atmosphere to foreign as well as local investment resulting in increased growth.
• One window operation for tax collection may effectively be introduced to replace the lengthy procedures that involve interaction of manufacturer with various agencies.
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7.5.2 Long Term Actions
• Government may utilize the Global Environmental Facility to obtain credits for effluent treatment plants like the ones in Kasur and Karachi for other dispersed units also. Under the existing situation, the small manufacturers cannot afford to comply with international standards on effluent control.
• To achieve higher growth, special incentives may be provided for setting up of industries for the manufacture of international quality trimming, accessories and component required by the leather industry.
• Technological up-gradation through joint ventures with leading international manufacturing houses.
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BIBLIOGRAPHY
Khan, Munir A. (1996), “Leather Treatment, Chemicals, Dyes, Environment, Leather Processing, Design of Leather Good and Machinery”. Prime Minister’s High Power Committee on S&T, Sub Committees Reports (Manpower/ Software/Defence etc.) Vol.8 to 19.
Leather Research Institute (2004), “Problems and Solutions” Pakistan Council of
Scientific and Industrial Research, Karachi Ministry of Industries & Production (2004), “Pakistan Investment Guide”. Experts
Advisory Cell, Ministry of Industries & Production, Islamabad. SMEDA (2003), Leather Sector of Pakistan.
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Annexure 7.1
THIRSTY AREAS IN LEATHER TRADE
Shoe Upper Leather (Gents and Ladies) + Children Shoes
Garment Leather (Trousers etc.)
Gloving Leather (Fashion Gloves)
Leather Goods (Purses, File Covers, Briefcases, Key Chains etc.)
Leather Chemicals Manufacturing of Leather Chemicals locally instead of imported
materials. Among the above two thirsty areas are discussed in the field of shoes & leather chemicals.
• Pakistan is enriched with the wealth of Cow & Buffalo Hides. • Balochistan & NWFP are enriched with the wealth of sheepskins. • Punjab & Sindh provide the fine quality of goat skins. All the raw materials
can be produced in super quality of shoe upper leather. • Leather Chemicals are 90% imported from Europe & Germany C&F price of a Leather Chemicals US dollar = Rs.60/- • Expenditures such as Customs Duty, Octroi Charges, Transportation = 60% Charges = Rs.40/- Total Cost =Rs.100
Note: This information is provided by Director, LRC, Karachi.
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Annexure 7.2
Pakistan Council of Scientific and Industrial Research Leather Research Centre, Karachi
Sr. No.
Problems Solution
1. Pakistan’s exports of leather to European Countries are declining due to shifting of tanning industries to China, Korea and other Asian Countries. The exports to U.S.A. the main market for leather apparel has declined 9%. The cost of production is very high in Pakistan as compared to our competitors like China and India. The high cost of various inputs especially utilities and taxes make our products uncompetitive in international market.
We have to reduce cost of production by decreasing prices of utilities. Quality and productivity can be improved through rationalization of tariffs and import of chemicals.
2. Due to shortage of live stock in the country the cost of raw hides has been on the increase regularly.
Modernization of live stock farming on scientific pattern is needed for better growth of live stock.
3. Pakistan being a developing country its leather products has to face barrier to export, i-e the use of sanitary and Phytosanitary standards from the developed countries i.e. Europe, U.S.A. etc. European union countries are demanding that leather goods should carry the certification marks of International Standard Organization (ISO) regarding pollution free environment at the factory premises where the product is manufactured.
The survival of leather industries lies in the adoption of quality standards and in obtaining certifications: ISO-14000, ISO-9000, ISO-17025, SA-8000.
4. According to the survey, in leather and leather garment industries only 15% are qualified and experienced workers while 85% are employed on the basis of experience only. Finishing recipes are prepared by the uneducated technicians not knowing the relationship between the binders and top coats but of previous experience. Exported leather goods during the storage and transportation because of the chemical reaction that takes place due to change of climate develop problems like spew.
LRC offers three and six months courses for the managers and supervisors to equip them with appropriate knowledge for rectification of the problem.
5. Leather garment industry is facing the problem of non availability of raw materials for their finished goods. At present lot of companies are exporting the leather in the form of wet blue semi tanned leather to avoid the effluent treatment problems which is a tremendous waste.
It is of paramount importance that we should export value added finished goods of leather. The government should ban the export of hides and semi tanned leather or impose 25% export duty on export of semi finished and finished leather.
6. Leather shoes which are in high demand all over the world, but Pakistan was unable to get its proper share due to high duties imposed on raw materia ls which has made the shoe industry uncompetitive in the international markets, restricting the growth of footwear industry in Pakistan on the one hand and causing loss of export markets available in Indonesia, Philippines, Malaysia, Thailand.
Duties on tannery machines, spare parts and raw materials should be reduced or imports of tannery machines and spare parts should be made duty free.
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7. Good quality leather is mostly exported and is not available for high value-added Leather Garments & Leather Products. Leather garments in Pakistan are made mostly from low grade & medium grade leather. These garments face stiff competition from Chinese & Indian products. Unless good quality leather is made available to value-added sectors, these sectors will continue to suffer and lose their market shares in global markets for Leather Garments and Leather Products.
It is proposed that 20-25% export duty should be imposed on finished leather. This would help availability of good quality leather produced locally.
8. Government of Pakistan has reduced the rate of rebate on leather products for exporters. But they are unable to reduce the cost of productions and maintain the standards of their goods in international markets. The margin of profit has been considerably reduced due to shortage of raw hides.
Govt. should revive the old rate of rebate as an incentive to increase the exports.
9. Pakistani exporters are facing difficulties in getting refunds from the income tax collectorate because of in-ordinate delay by the income tax collectorate in giving refunds to exporters and not honouring SROs issued by CBR from time to time.
Income tax collectorate should be accordingly advised.
10. Pakistani leather garments exporters are unable to penetrate into the markets of Poland, Japan and Russia be cause of high import tariff. These three markets have huge potential for leather garments.
Pakistani leather garments exporters should focus on marketing efforts in these three countries.
Targets
We should strive to excel in leather production techniques, through continuous research and development.
1. Development of better & cost efficient sourcing of hides and skins.
2. Development of production techniques: development of the most efficient method of producing leather that should consists of:
Ø Improving the quality of leather through introduction of new processes and introduction of just in time production methods.
Ø Introduction to new machines, that are not only more efficient but are also safer to use, and has also helped in shortening the process cycle.
Ø Research in to application of new chemicals so as to develop cleaner and environment friendly technologies. This has also resulted in overall reduction of process costs.
3. Development of skilled personnel:. To successfully compete in the international market we much be able to train and retain well-trained and experienced technicians and high caliber staff.
Technical Istitutes must develop training programmes that encourage technicians to improve and develop new technical skills .
4. We must conduct research to develop a roadmap for quality. Quality is process consistency that effects both costs and customer relations. The industry must implement quality control systems and testing regimes to ensure zero defects.
Benefits
Although leather and leather products have ample scope for exports in the international market yet the leather industry is suffering from irritants such as trained manpower, shortage of raw hides and skins, duties on tannery machines and its spare parts etc. LRC has obtained accreditation of ISO17025. This centre is extending training and testing facilities to leather exporters including testing and training of manpower at reduced costs.
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Annexure 7.3
Projects: Leather Industry
Action Cost Time Agency Impact
Strengthening the tanning institute Establish Slaughter training institute
Rs.100 million Rs.250 million
Short-Term HEC/MOIP Improved product quality
Establish Footwear Design Centre in Sialkot and Karachi
Rs.250 million Short-Term HEC/EPB in partnership of private sector.
Improved quality and variety would enhance the exports of footwear.
Establish Leather Garments Centre in Sialkot and Karachi
Rs.500 million Short-Term MOIP Increased export market share
Technological Up-gradation (Leather Processing and Tanning Machinery) Establish leather technology center at Sialkot Establish training center at Karachi and Lahore
Rs.700 million Rs.350 million Rs.350 million
Medium-Term HEC/MOST in partnership of private sector.
Value-addition in the leather products would not only enhance the quality of the product but would also be a source of foreign exchange earnings.
Adoption of Environment Friendly Technologies Institutional support for Eco friendly tanning processes Establish effluent treatment plants like the ones in Kasur and Karachi
Rs.450 million
Medium-Term HEC/Ministry of Environment in partnership of private sector
Complying with the international norms would increase the leather exports.
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Annexure 7.4
PSDP Financial Allocation for Leather (Rs. in Million)
Period Total S&T HRD/ Skill
2005-06 249 195 54
2006-07 290 210 80
2007-08 344 225 119
2008-09 421 242 179
2009-10 546 259 287
Total 1850 1131 719
2010-11 476 114 362
2011-12 510 123 387
2012-13 547 132 415
2013-14 587 142 445
2014-15 627 152 474
Total 2747 664 2083
2015-16 671 163 508
2016-17 719 175 544
2017-18 763 187 576
2018-19 814 200 614
2019-20 859 214 645 Total 3826 939 2887
Note: The figures for 2005-06 to 2009-10 may not exactly be equal to the total cost of the projects because of throw forward.
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CHAPTER 8
MATERIALS15
Rehana Siddiqui
The beneficiation and development of new materials is critical for economic growth and improved competitiveness of a country. In recent years, the research and development has changed the complexion and use of materials in many industries, particularly in the areas of defense, electronics, engineering, transport, energy and sports. The critical issues faced by Pakistan are development of materials utilizing the indigenous resources, beneficiation of minerals and development of new materials especially the composites. Pakistan has a strong mineral base as compared to many other developing countries. However, the country has not been able to extract maximum potential benefits from its mineral base. Focused efforts are required for the improvements and development of new materials. The critical materials included in the study are: Iron ore for the production of steel, copper, magnesite, phosphate, silica, china clay, gypsum, and others. The study proposes development of composite materials like Polymeric materials, photonic materials, GRP and other composites. Following set of required actions are suggested for achieving the objectives:
1. Acquisition of technology exploiting domestic reserves of iron ore for the production of steel,
2. Establishment of mini steel mills utilizing this technology at various sites like Nokundi, Kalabagh and others,
3. Establish research centre for copper and other precious metals, 4. Establish Centre for the development and improvement in refractory
bricks like magnesite refractory bricks, 5. Promotion of research on gypsum, 6. GRP/FRP development centre for development of composite
materials 7. Establishment of Institute for theoretical research on materials, 8. Opening up of departments or upgrading the existing departments in
universities for advanced studies in materials in various universities around the resource rich sites,
9. Opening up/upgrading of Centre for Development of polymeric materials,
10. Centre for development of photonic materials, 11. Research and development for exploitation of resources of gemstone,
and 12. Establishment of Geo-data and Geo-mapping Centers.
All these efforts are expected to enhance the productivity and efficiency of the materials that will result in higher and diversified economic growth.
15 We are grateful to Mrs. S. T. K. Naim for her interest and valuable support for the study. Thanks to Dr Anwar ul Haq (Chairman PCSIR), Mr. Imtiaz Rastgar (Rastgar Engineering Company), Mr S. H. Faruqi (Chairman Eastern Technique (Pvt) Ltd), Mr. Mushtaq Hussain (from PCSIR), Mr Tajamal Hussain (Consultant Experts Advisory Cell) and Engr. Tariq Mahmood (BET, Lahore) for their useful suggestions and valuable help. We are thankful to Mr Zameer Awan of Pakistan Council for Science and Technology for arranging all the meetings.
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8.1 INTRODUCTION
Availability of materials and development of new materials is an important source of productivity growth. The development of new materials has changed the complexion and pace of economic growth, particularly in the area of defense, electronics, engineering, transport, energy and sports goods. For the development of new materials greater emphasis is on property attributes of materials, such as efficient design, high strength to weight ratio, lower energy consumption and higher value addition in production. The availability and improvements of existing technology and development of new technology are critical for the development of new materials. However, the critical ingredients for the development of this activity are strong base for research and development (R & D), qualified and skilled manpower, and availability of raw materials, financial resources and other infrastructure.
In this section, we propose strategies for the development of selected materials that are critical for the economic growth of Pakistan. The development of existing and new materials depends critically on the availability of basic materials (basically from mining) and capability to develop new materials (particularly the composites).
8.2 GEOGRAPHICAL MAPPING
In order to extract maximum benefit from the vast mineral resources available in Pakistan, geological mapping is an important prerequisite. It also improves the profitability and reduces the element of risk for new investment. Currently, only 33 percent area of Pakistan has been mapped. For this purpose it is important to establish a remote sensing center for producing accurate maps. Mines department at the Federal and Provincial level, Geology Departments in Universities, and SUPARCO can play an important role. (see Table 8.1).
Table 8.1: Geological Survey of Pakistan Action Agency Time Cost Benefit
Geological Mapping of Pak.
PMDC, Universities
5 years Rs. 450 million Reduction in risk for new exploration activities.
Exploration Activities
PMDC Continuous activities
Will vary with time and nature of exploration
Increased availability of improved inputs for industrial growth.
8.3 STRATEGIES FOR EXPLORATION OF THE MINERAL RESOURCES Keeping in view the importance of materials in industrial development, the emphasis is
on the development of materials using indigenous mineral resources. A brief overview of the mineral categories and their industrial use after beneficia tion is given in Table 8.2. Most of these minerals are available in Pakistan. However, testing, grading and acquisition of appropriate technologies are required for their beneficiation and efficient utilization. Following critical issues are identified for intervention:
a) Utilization of indigenous raw material; b) Beneficiation of minerals; and c) Development of new materials
Given the resource, infrastructure and human resource constraints, it may not be possible to exploit simultaneously all the mineral resources available in the country. Therefore, we have selected a few minerals for discussion below.
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Table 8.2: Property Class cum End-Use Classification Principal Property Class
Industrial End-Use and Typical Commodities
CHEMICAL MINERALS
Chemical Industry: borax, bromine, salts, chemical grade chromite, fluorspar, ilmenite and other titanium minerals, lithium minerals, phosphates, sodium carbonates, sodium sulfate and sulfur; Fertilizer Industry: phosphates, potash, sulfur, limestone, dolomite and gypsum; Ceramics Industry: ball clay, bauxite, borax, refractory-grade chromite, dolomite, feldspar, fire clay, kaolin, kyanite, limestone, lithium salts, magnesite, silica, soda ash, wollastonite and zircon; Metallurgical Industry: cryolite, fluorspar, burnt lime and limestone.
PHYSICAL MINERALS
Structural Minerals: absestos, cement, gypsum, lightweight aggregates, perlite, sand and gravel, stone and vermiculite; Extender and Filler Pigments: iron oxides such as ochres, limonite, hematite, siderlite, pyrite, magnetite and goethite; Abrasives: silica sand, corundum, emery, garnet, industrial diamonds, pumice, quartz; Process Aids: baryte, bentonite, diatomite, kaolin, lithium minerals, perlite; Foundry Minerals: silica sand, zircon, olivine sand, chromite, staurolite; Industrial Gem Materials: diamonds, rubies, sapphires; Electronic & Optical Minerals: quartz, calcite, mica, apatite, fluorite, halite.
Source: Noetstaller Richard (1988). Industrial Minerals. World Bank Technical Paper Number 76.
8.3.1 Steel Using Indigenous Iron Ore 16
Currently the production technology in steel industry needs high quality iron ore that is not available indigenously. The dependence on imported inputs raises the concerns about its availability at affordable prices. The production technologies that can use indigenous iron ore are available but are not used in the country. This requires action to acquire technology, and establishment of small steel mills using indigenous iron ore.
Iron ore is basic raw material for the steel industry. However, currently the domestically available iron ore is not used in steel production because the production technology adopted for the production of steel requires Iron Ore of different grade. Three types of iron ore are available in Pakistan:
i) Sedimentary found typically at Kalabagh and D.G. Khan. These are of low grade containing 30-34 percent iron and 21-24 percent silica.
ii) Volcanic deposits at Chilghazi, Chgendik and Pachin Koh, contain 40-50 percent iron and 12-20 percent silica.
iii) Hydro thermal
16 For Steel Mill at NoKundi, preliminary detailed report has been prepared by Mr S. H. Faruqi (Chairman Eastern Technique (Pvt) Ltd.).
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According to Pakistan Economic Survey (2002/03), Pakistan has over 430 million tons
of iron-ore reserves. The extraction peaked in 1999/2000 with 45,980 tonnes (000) from only 318 tonnes in 1990/91, but declined to 4,942 tonnes (000) in 2001/02. However, this Iron Ore is not used in the production of steel. The import of iron, on the other hand, increased from Rs. 7,100 million (4.15 percent of total imports) in 1990/91 to Rs 24,633 million (3.88 percent of total) in 2001/02. In steel industry, the production of coke and pig iron declined by 0.37 percent and -0.27 percent per annum, respectively, but that of billets increased by 2.04 percent per annum during 1990-2002.
With the rising price of steel, domestic manufacturing based on indigenous resources is critical. The major issues are utilization of available reserves of iron-ore and up-gradation and beneficiation of available resources. For this purpose, development of steel mill using technologies for utilization of indigenous iron ore is critical. These technologies are available from Germany and other countries and a series of steel mills can be established at Nohundi, Kalabagh and other locations.
The plan for a steel mill, at Nokundi, of production capacity of 1,087,000 million tons of pig iron/1,230,000 million tons of ingots/1,072,000 mt of steel billets at a cost of Rs. 36.0 billion. The steel mill can be completed in 5 years and would provide employment to 6500 persons.17 Currently the reserves of iron-ore at Nokundi are sufficient for 15 years. However, the continuous exploration is required for finding more reserves in the area. (see Table 8.3).18
Change in the production technology will not only reduce the dependence of steel production on imported raw material (except for Coke), it will also result in lowering the steel price, and thus reducing the cost of production of down stream industries, particularly in the engineering and surgical goods industry. By-product, slag from blast furnace, can be used in road construction, in the production of slag cement, or in the production of slag wool for industrial and household applications.
Table 8.3: Steel Mill at Nokundi
Actions Needed Agency Time Approximate cost Expected Benefits 1. Establishment of Steel Mill at NoKundi
Ministry of Industries/MOST
5-years Rs. 39 billion Availability of steel at low price; saving of foreign exchange.
1 a: Acquisition of technology-
MOST
-do -do (The technology is available from Germany-the cost will depend on time of acquisitions)
1 b: Preparation of feasibility report
Ministry of Industries
-do- -do- Establishment of cost effective steel mill
In 1960s, the technology was acquired from Salzgitter, Germany to build a steel mill
utilizing indigenous iron ore, at Kalabagh. However, the project was abandoned later. The technology is still in use in several European countries. Other mineral inputs and water, except coke of desired quality, are also available at Nokundi. The coke can be imported from Iran and cost will not be high.
17 The possibility of five-times increase in production capacity is also worked out by Mr S. H. Faruqi of Eastern Technique (Pvt) Ltd. 18 It is claimed that the mill can start paying the dividend to the share holders in the third year of its production. The manufacturing cost of steel billets is Rs. 3834/- per ton. The average price of Nokundi steel (billets) at Karachi is worked out to be Rs. 14,500/ - per ton, where as the price of Karachi steel is Rs. 16,350/- per ton.
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The mill may be set up as private-public partners and government can provide a part of the required resources, and remaining generated through capital market. It is claimed that the steel mill will be able to pay dividends to shareholders within 5 years of its operation. Currently the estimated cost and benefits are given for the steel mill of production capacity of 1 million tons of billets. However, it can be expanded upto 5 million tons with additional costs of furnaces only.
Once the production technology is acquired and tested, small steel mills can be built in Kalabagh and other areas, to meet rising demand. (see Table 8.4).
Table 8.4: Opening up of Other Steel MillsActions Needed Agency Time Approximate cost Expected
Benefits Steel Mill at Kalabagh (need to work on the quality of iron ore, and examine the availability of other raw materials).
Ministry of Industries and MoSt
7-10 years Rs. 49 billion (for the steel mill of production capacity 1 million tons of billets. However, the capacity can be expanded by installing new furnaces.
Same as above.
With the rising capabilities and technology acquisition R & D efforts can be directed to
beneficiation and development of other uses of domestic iron ore. PMDC and Ministry of science and technology can work jointly for this purpose. (see Table 8.5). Alternative technologies (Corex technology already used in South Africa and Korea) can be acquired. It will reduce the cost of producing steel that will affect the productivity in other industries, particularly in chemicals, petrochemical, automotive and other engineering goods industry, improve energy efficiency in steel production and control pollution.
Table 8.5: Beneficiation of Indigenous Iron OreActions Needed Agency Time Approximate cost Expected Benefits Development of Indigenous technology for utilization of domestic iron ore
PMDC/ MoST
7-10 years
Rs. 300 million Increase the utilization of domestic iron ore. It may reduce the cost of production and save foreign exchange resources
8.3.2 Copper and Copper Bearing Gold and Silver Reserves are available at Koh-I-Dilal, Ponkit, Pashin, Pharra Koh, Samkoh and other
mountainous areas of Pakistan and a number of companies from Britain and Australia are already working on these minerals. However, in order to extract maximum benefits there is a need to promote exploration and processing in Pakistan. There is possibility of 80 percent value addition in copper ore that can lead to expansion in copper industry. Geological mapping and improvements in extraction capability would go a long way in the copper industry. Governments, at Federal and Provincial levels, have to come up with strategies to induct private sector in copper extraction and processing.
As mentioned earlier, copper is important ingredient for the engineering and electrical industries. The growth rate of value of production of electrical machinery was 22.0 percent during 1990/91 and 1995/96; and the growth rate of output of electrical bulbs during 1990/91 and 2001/02 was 0.93 percent and of tubes it was 2.77 percent. Options for the production of electrolytic copper, copper tubing and powder would help in increasing productivity of these industries. Furthermore, development and commercialization of copper wire can increase productivity in power sector by reducing power losses. Therefore, the need for expanding exploration activities and establishing a Research Centre for Copper for its beneficiation is obvious (see Table 8.6).
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Table 8.6: Beneficiation of CopperActions Needed Agency Time Approximate
cost Expected Benefits
Research Centre for Copper
MoST and Ministry of Industries
5-7 years Rs. 350 million Improvement in the productivity of industries, particularly industries producing electrical goods
8.3.3 Magnesite
Large reserves are available in Baluchistan (in Muslim Bagh and Khuzdar) and in NWFP (in Kumhar and Abbottabad). However, no plant for the manufacturing of refractory bricks is available in Pakistan, resulting in dependence on imports. The industries dependent on refractories brick include Cement, Pak Steel, Steel Melters, Foundary and other heat installing units. The heat intensity of the magnesite refractory bricks is high and it increases the productive capacity and life of kilns. Efforts are needed to acquire technology and know-how for manufacturing of magnesite refractory bricks that can help to improve productivity. Key issues include development and utilization of available reserves of magnesite and explore the possibility of technology acquisition. For this purpose establishment of a research centre is important.[see Table 8.7].
Table 8.7: Development of Advanced RefractoriesActions Needed Agency Time Approximate
cost Expected Benefits
Establish Center for Refractories (magnesite and others)
MoST: PCSIR
5-7 years Rs. 750 million
Improvement in the quality of glass and ceramics products
Development/Import of technology for refractory minerals
PMDC/ MoST
5-years Rs. 375 million
Magnesite and chromite refractors for cement, steel and other high temperature furnaces will improve the productive efficiency.
8.3.4 Glass and Ceramics
Development of glass and ceramics materials is important for glass, tiles, sanitory ware, and other ceramic industries. This has important implications for the development of construction sector and industry for the production of household ware. Advanced sensors based on advanced functional ceramics can be developed. This will affect the productivity in agriculture, avionics, space, genetic engineering, automobiles and home appliances. This depends critically on identification and implementation of standards and uniform quality like high purity silica.
8.3.5 Composite Materials
The composites include polymer matrix composites, metal matrix composites, ceramic matrix composites and carbon-carbon composites. The composites can be categorised in three groups.
–Group 1: Low cost and low performance for furniture making –Group 2: Medium cost and high performance primarily used in the production of
automobiles and aerospace –Group 3: Very high cost and high performance for defence and aerospace.
Polymeric Materials are needed particularly in the plastic industry. These products and components are important for the automobile, electronics, and others. Pakistan is importing 120
160
plastic items and is major input in a number of industries. The development of photonic materials is critical important for the Following sectors are expected to gain: information technology, fiber optics, diagnostic applications in health care, remote sensing, and biotechnology. To improve the productivity of the sector, following actions are needed:
1) Development of polymer alloys, blends, compounds and composites. 2) Development of photonic materials. 3) Efforts to develop engineering plastic, particularly energy saving. 4) Strengthen the existing institutions. 5) Strengthening of the training institutions like Pak-Swiss training centre. 6) Establishment of centre for quality control.
Table 8.8: Development of Polymeric Materials and Photonic Materials
Agency Time Expected Cost
Expected Benefits
Opening up of Centre of Development of Polymeric Materials
MoST/ HEC
5 years Rs, 1000 million
Industrial Development
Centre for development of photonic materials
MoSt 10-15 years
Rs. 1000/ -(million)
Following sectors are expected to gain: information technology, fiber optics, diagnostic applications in health care, remote sensing, and biotechnology
Furthermore efforts are required to develop composite materials like GRP/FRP. Among the composite materials Fiber Reinforced Polymer (FRP) are playing an increasingly important role in Chemical processing industries, Pulp and paper, Power, Waste treatment, and others. At present, cost of production of these materials is higher in Pakistan due to smaller market size but as the use of FRP in industrial production would rise, it is expected to result in a lower production cost.
There is a need for R & D and trained personnel, for the development of the composite material. In order to improve the research in the area and improve the capabilities of the manpower courses in Composite Engineering are needed at the graduate level. Simultaneously with R & D and training of manpower, efforts should be made to establish production capability. [see Table 8.9].
Table 8.9: Development of Composite MaterialsActions Needed Agency Time Approximate cost Expected
Benefits FRP/GRP Development Centre
MoST/PAEC 15-20 years 700 million
Improves the productivity of the industrial sector
Establishment of Institute for Theoretical Research
MoST/ Universities/ PAEC
15-20 years 400 million Improvement is efficiency of materials
Currently, consumption of GRP is Pakistan is about 2000 Mt/yr, whereas economical size of GRP plant is 10,000 Mt/yr. However, the market size can expand with growth of industries using wood, steel and aluminum as the basic material input. With the initial investment of $ 15 million the glass manufacturers can produce glass fiber. The GRP conversion units can be established provided technology is available and they can play an important role in improving the productivity of industrial sector, particularly the SME sector.
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8.3.6 Other Minerals and Materials
a) Phosphate
About 24 million tons of potential reserves are available at Hazara district. Its development is critical for increasing the production of chemicals particularly chemical fertilizer. Utilizing phosphate, two types of products can be developed, viz., Milled Phosphate for direct application that is effective in acid soils, and Milled under Acidulated Phosphate is effective as chemical fertilizer. For the development of these, technology acquisition and adoption and later commercialization is absolutely important. The foreign direct investment can play an important role in this context. BRGM of France expressed interest in providing the technology to utilize this resource. BRGM, GOP and Ministry of Agriculture can contribute resources for its development.
Important chemical minerals needed in different industries are:
a) Chemical industry needs phosphate, sodium carbonites, sodium sulfate and Sulfer;
b) Fertilizer industry depends on phosphate, potash, sulfar, limestone, dolomite and gypsum;
c) Ceramics Industry needs dolomite, bauxite, fire clay, soda ash, chromite, magnesite and lithium salts.
Development of materials includes not only the development of minerals, and materials, it also includes development of complex material. These include: development of Photonic material that will affect areas like information technology, fiber optics, diagnostic applications in health care, remote sensing, pollution control and biotechnology
b) Gypsum/Anhydrite Pakistan has gypsum reserves of 5-6 billion tonnes. It can be used as soil conditioner for
the correction of sodic salts, treatment of low quality tubewell water, canal and distributaries lining with gypsum, and use in construction industry and in medicine. Pakistan extracted 328 000 tonnes of Gypsum in 2001/02 which is significantly lower than extraction in 1990/91 (468000 tonnes). Huge quantities are available in the country. Major uses include: Sterilization, reduction in disease particularly Malaria, TB and Hepititus. Currently the production methods are defective, inefficient and expensive with no quality control.
c) Limestone for Lime Huge quantities of lime stones are available in the country. It can be used effectively in
sterlization, reduction in diseases particularly Malaria, TB, and Hepititis. Currently the production methods are defective, inefficient and expensive with no quality control.
d) China Clay The main users of China Clay are Ceramics, Paper Filing and Coating, Paints, Rubber,
Agriculture and Pharmaceuticals. Total available resources in the country are 4.9 million tons and annual production is 54000 tonnes in 2001/02. Pakistan is also importing China Clay for industrial use. In 2001/02, 15 percent of total consumption was imported. Utilization of existing reserves, exploration for new reserves to reduce dependence on imports. Need to explore for new reserves. For this purpose surveys should be conducted. For the exploration activity GOP can take the initiatives.
In order to develop these minerals, following action plan is suggested in table 8.10:
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Table 8.10: Development of other Minerals and MaterialsActions Needed Agency Time Approximate cost Expected Benefits Research and Development on gypsum
PMDC/ PCSIR
5-years Rs. 100 million Improve the productivity in agriculture, health and construction sectors
National Centre for Mineral Development for Industrial Chemicals
MoI and MoST (PCSIR)
5-7 years Rs. 300 million -do-
Opening up of Departments for Advanced Studies in Materials
MoST/ HEC
5 years Rs, 1000 million HRD and Rapid productivity growth in industrial sector.
Centre of Excellence for Research on Advanced Materials
MoST /HEC 5 years Rs. 1000 million Rapid productivity growth in industrial sector.
Upgradation/Srengthening of Laborataries in Minerals
PMDC 5 years Rs. 350 million Facilitate the exploitation of minerals
R & D in the acquisition of technology and training of manpower for exploiting the potential in the Gemstone
PMDC/MoI 5 years Rs. 320 million Value Addition and increase in the foreign exchange earnings
R & D to minimize the Environmental Losses
PMDC/ MoST/ Universities
10 years Rs. 190 million Help the conservation and minimize the resource degradation
8.4 HUMAN RESOURCE DEVELOPMENT
It is mentioned earlier that exploitation of the available depends critically on the availability of appropriately trained manpower. Development of educational institutions, up to date curriculum, and qualified teaching staff are needed for improving the capability of the work force. For this purpose, in addition to the actions suggested in Table 8.10, up gradation and opening up of new departments at the university level are urgently needed.
Table 8.11: Training of Manpower Actions Needed Agency Time Approximate
cost Benefits
Opening up of Skill Development Centre
MoST/ MOE 5-years
Rs. 500 million Increase in Productivity of the labour force
Centre for Industrial/Educational institutions/ R & D Institutions Linkage
MoST/HEC/MoI 5-years
Rs. 500 million Commercialization of the innovations in domestic technology.
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8.5 CONCLUSIONS
The beneficiation and development of new materials is critical for economic growth and competitiveness of a country. In recent years, the research and development has changed the complexion and use of materials in many industries, particularly in the areas of defense, electronics, engineering, transport, energy and sports. The critical issues faced by Pakistan are development of materials utilizing the indigenous resources, beneficiation of minerals and development of new materials especially the composites. Pakistan has a strong mineral base as compared to many other developing countries. However, the country has not been able to extract maximum potential benefits from its mineral base. Focused efforts are required for the improvements and development of new materials. The critical materials included in the study are: Iron ore for the production of steel, copper, magnesite, phosphate, silica, china clay, gypsum, and others. The study proposes the development of composite materials like Polymeric materials, GRP and other composites. Following set of required actions are suggested for achieving the objectives:
1. Acquisition of technology exploiting domestic reserves of iron ore for the production of steel,
2. Establishment of mini steel mills utilizing indigenous iron ore at various sites like Nokundi, Kalabagh and others,
3. Establish research centre for copper and other precious metals, 4. Establish Centre for the development and improvement in refractory bricks like
magnesite refractory bricks, 5. Promotion of research on gypsum, 6. GRP/FRP development centre for development of composite materials 7. Establishment of Institute for theoretical research on materials, 8. Opening up/upgrading of departments for advanced studies in materials in various
universities around the resource rich sites, 9. Opening up/upgrading of Centre for Development of polymeric materials, 10. Centre for development of photonic materials, 11. Centre for research in bio materials; 12. Research and development for exploitation of resources of gemstone, and 13. Establishment of Geo-data and Geo-mapping Centers.
All these efforts are expected to enhance the productivity and efficiency of the materials that will result in higher and diversified economic growth.
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BIBLIOGRAPHY Faruqee, S. H., (2001), “Steel Mill at NoKundi”, (unpublished preliminary detailed
report), Eastern Technique (Pvt) Ltd.), Islamabad. Government of Pakistan, (2004), “Investment Oriented Study on Minerals and Mineral
Based Industries”, vol. I and II, Experts Advisory Cell, Ministry of Industries and Production, Islamabad, (April).
Government of Pakistan, (2003), “Materials:Foresight 2003-Report of the National
Committee/Think Tank on Materials and New Materials”, Prepared for Pakistan Council of Science and Technology, Islamabad.
Government of Pakistan (various issues), “Pakistan Economic Survey”, Ministry of
Finance, Islamabad. Hussain, T. (2003), “Mineral Sector: Vision and Strategy”, paper presented at Mineral
Sector Development Consultation Workshop with Stakeholders, Islamabad, (December).
Mahmood, T. (2004), “State of Composites Industry in Pakistan”, Unpublished Report of
BET, Lahore, Pakistan. Noetstaller Richard (1988), “Industrial Minerals”, World Bank Technical Paper Number
76, World Bank, Washington, D.C.. TIFAC (1996), “Materials and Processing: Technology Vision 2020”, Technology
Information, Forecasting and Assessment Council, Department of Science and Technology, New Delhi, (September).
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Annexure 8.1 Table A8.1: Geological Survey of Pakistan
Action Agency Time Cost Benefit
Geological Mapping of Pakistan
PMDC, Universities
5 years Rs. 450 million Reduction in risk for new exploration activities.
Exp loration Activities
PMDC Continuous activities
Will vary with time and nature of exploration
Increased availability of improved inputs for industrial growth.
Table A8.2: Steel Mill at Nokundi
Actions Needed Agency Time Approximate cost Expected Benefits 1. Establishment of Steel Mill at NoKundi
Ministry of Industries/MOST
5-years Rs. 39 billion Availability of steel at low price; saving of foreign exchange.
1 a: Acquisition of technology.
MOST
-do -do (The technology is available from Germany-the cost will depend on time of acquisitions)
1 b: Preparation of feasibility report
Ministry of Industries
-do- -do- Establishment of cost effective steel mill
Table A8.3: Opening up of Other Steel Mills
Actions Needed Agency Time Approximate cost Expected Benefits Steel Mill at Kalabagh (need to work on the quality of iron ore, and examine the availability of other raw materials).
Ministry of Industries and MoSt
7-10 years
Rs. 49 billion (for the steel mill of production capacity 1 million tons of billets. However, the capacity can be expanded by installing new furnaces.
Same as above.
Table A8.4: Beneficiation of Indigenous Iron Ore
Actions Needed Agency Time Approximate cost Expected Benefits Development of Indigenous technology for utilization of domestic iron ore
PMDC/ MoST
7-10 years
Rs. 300 million Increase the utilization of domestic iron ore. It may reduce the cost of production and save foreign exchange resources
Table A8.5: Beneficiation of Copper
Actions Needed Agency Time Approximate cost Expected Benefits Research Centre for Copper .
MoST and Ministry of Industries
5-7 years Rs. 350 million Improvement in the productivity of industries, particularly industries producing electrical goods
Table A8.6: Development of Advanced Refractories
Actions Needed Agency Time Approximate cost Expected Benefits Establish Center for Refractories (magnesite and others)
MoST: PCSIR
5-7 years Rs. 750 million Improvement in the quality of glass and ceramics products
Development/Import of technology for refractory minerals
PMDC/ MoST
5-years Rs. 375 million Magnesite and chromite refractors for cement, steel and other high temperature furnaces will improve the productive efficiency.
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Table A8.7: Development of Polymeric Materials and Photonic Materials
Agency Time Expected Cost
Expected Benefits
Opening up of Centre of Development of Polymeric Materials
MoST/ HEC
5 years
Rs, 1000 million
Industrial Development
Centre for development of photonic materials
MoSt 10-15 years
Rs. 1000/ -(million)
Following sectors are expected to gain: information technology, fiber optics, diagnostic applications in health care, remote sensing, and biotechnology
Table A8.8: Development of Composite Materials
Actions Needed Agency Time Approximate cost Expected Benefits FRP/GRP Development Centre
MoST/PAEC 15-20 years 700 million
Improves the productivity of the industrial sector
Establishment of Institute for Theoretical Research
MoST/ Universities/ PAEC
15-20 years 400 million Improvement is efficiency of materials
Table A8.9: Development of other Minerals and Materials
Actions Needed Agency Time Approximate cost
Expected Benefits
Research and Development on gypsum
PMDC/ PCSIR
5-years Rs. 100 million
Improve the productivity in agriculture, health and construction sectors
National Centre for Mineral Development for Industrial Chemicals
MoI and MoST (PCSIR)
5-7 years
Rs. 300 million
-do-
Opening up/up grading of Departments for Advanced Studies in Materials
MoST/ HEC
5 years Rs, 1000 million
HRD and Rapid productivity growth in industrial sector.
Opening/Up grading Centre for Research on Nano technology and Nano Materials
PAEC 7-years Rs. 1600 million
Improved productivity of the existing materials
Centre of Excellence for Research on Advanced Materials
MoST /HEC 5 years Rs. 1000 million
Rapid productivity growth in industrial sector.
Upgradation/Srengthening of Laborataries in Minerals
PMDC 5 years Rs. 350 million
Facilitate the exploitation of minerals
R & D in the acquisition of technology and training of manpower for exploiting the potential in the Gemstone
PMDC/MoI 5 years Rs. 320 million
Value Addition and increase in the foreign exchange earnings
R & D to minimize the Environmental Losses
PMDC/ MoST/ Universities
10 years Rs. 190 million
Help the conservation and minimize the resource degradation
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Table A8.10: Training of Manpower
Actions Needed Agency Time Approximate cost
Benefits
Opening up of Skill Development Centre
MoST/ MOE 5-years
Rs. 500 million Increase in Productivity of the labour force
Centre for Industrial/Educational institutions/ R & D Institutions Linkage
MoST/HEC/MoI 5-years
Rs. 500 million Commercialization of the innovations in domestic technology.
Additional Projects Needed for Development of Minerals. Howe ver, costs have to be worked out by the relevant personals.
For rapid economic growth, the Government of Pakistan can consider following actions in the long run:
a. Steel:
1. Research and Development on near net casting for steel 2. Improvements in blast furnace technology for enhancing productivity 3. Improving energy efficiency of steel production.
b. Aluminium, though the bauxite reserves are available in small quantity in Pakistan,
following steps can be taken to improve the productivity of this material:
1. Improvements in the technology of smelters 2. Improvements in electrolyte cell to improve the efficiency. c. Research on Bio Materials
1. Develop biological materials based on plants, marine life and animals 2. Establish interdisciplinary bio medical program to develop Biomaterials at the higher
education level. 3. Development of biomaterial devices 4. Development of bio substitutes like blood and tissue engineering. d. Surface Engineering
1. Indigenous development of thermal spray units and feed stock 2. Improvements in academic institutions to develop capabilities for characteristics
evaluation and surface coating and environment friendly electroplating techniques and feed stock materials
e. Glass and Ceramics
1. Improvements in production technologies and use of cleaner fuel for sintering and processing
2. Develop capabilities to integrate advanced sensor technology 3. Up to date knowledge and education on ceramic materials to meet the changing needs of
modern industrial sector.
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Annexure 8.2
PSDP Financial Allocation for Materials (Rs. in Million)
Period Total S&T HRD/ Skill
2005-06 1257 900 357
2006-07 1463 900 563
2007-08 1808 900 908
2008-09 2349 1007 1342
2009-10 3146 1242 1904
Total 10024 4949 5075
2010-11 3761 1364 2397
2011-12 4019 1541 2478
2012-13 4292 1725 2567
2013-14 4544 1966 2579
2014-15 4838 2201 2638
Total 21455 8796 12659
2015-16 5034 2394 2640
2016-17 5556 2727 2830
2017-18 5873 3083 2789
2018-19 6221 3481 2740
2019-20 6699 3777 2921 Total 29382 15462 13920
Note: The figures for 2005-06 to 2009-10 may not exactly be equal to the total cost of the projects because of throw forward.
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CHAPTER 9
CHEMICAL PROCESS INDUSTRY
Ejaz Ghani
Most of the raw materials and intermediates for dyes & pigments, paints & varnishes, pesticides and plastics & plasticizers are being imported. These raw materials and intermediates are mainly derived from petrochemicals, which have no base in Pakistan. The petrochemical industry is highly technology intensive with high capital requirements. Developments in petrochemical technology are taking place very fast. Changes in technology and raw materials have shifted regularly and frequently towards lower costs and competitive production, less energy consumption through better conversion efficiency, broader spectrum of product grades to meet specific needs as in case of detergents, reduction in pollution from the production technologies and so on.
Inorganic chemicals are normally derived from mineral base, which is still an under-developed sector in Pakistan. Several minerals are available in the country but they have not been properly explored. Similarly, agricultural raw materials are not fully utilized in value added products.
A number of projects in various areas have been suggested for the development of chemical processing industry in Pakistan. The major thrust areas of the pharmaceutical sciences in Pakistan can be defined as Pharmaceuticals and Drugs, Diagnosis pharmaceuticals, Phyto-pharmaceuties, Veterinary Pharmaceutics, and alternative medicines (Homeopathy), Biochemical); and Pakistan may focus on: Manufacturing the fermentation products; Manufacturing of drugs based on slaughterhouse waste- such as plasma substitutes, insulin, pituitary extract, oxytocin etc.; Inorganic drugs such as magnesium trisilicate, aluminum hydroxide gel, attapulgite, ferrous salts, kaolin, sodium alginate etc.; Phytochemicals such as opium derivatives [codeine, papaverine, morphine], sylimerin, aescin, isaphagula husks etc. For this objective, the plants need to be cultivated, and standardized on scientific grounds; and Organic drugs based on imported intermediates.
9.1 INTRODUCTION
The chemical Industry is a multi-dimensional industry and is crucial for the economic development. Almost all the sectors in modern economics depend on the inputs which are produced by the chemical industries. The industry is complex and is highly capital - and technology-intensive.
One may distinguish two types of chemicals, namely, organic and inorganic. The organic chemicals are essentially petro-chemicals and most of the raw materials for such industries including dyes and pigments, paint and varnishes, pesticides, and plastic are being imported into
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the country. Even though for inorganic chemicals, the mineral and natural resources are available in the country, but so far they have not been fully utilised. Another area under chemicals is the pharmaceutical industry. The industry at present is basically a packaging, mixing and blending industry.
Pakistan has not yet utilized the potential of chemical sector. The development of the chemical industry depends upon the movement into higher value-added products in upstream and downstream activities, feedstock availability, technology and skilled manpower. In this chapter we examine these issues.
At the time of independence, chemical industry in Pakistan virtually did not exist. Whereas some chemical industries including fertilizers, Polyesters, Pure Terephthalic Acid (PTA), Poly Vinyl Chloride (PVC) and some basic chemicals have been developed most of the chemical industry in Pakistan is still at the initial stages of its development. .
Chemicals imports of Pakistan constitute approximately US$ 2 billion accounting for on average 15 percent of total imports. The five major imports of organic chemicals (including petrochemicals) are plastics & resins, pharmaceuticals, pesticides and fertilizers. At the same time, domestic resources of natural gas, petroleum and coal have not been utilized for the production of chemicals where the value-addition can be many-fold. The only exception is the use of natural gas to produce fertilizers. Given the input substitution possibilities and availability of raw materials indicate a vast potential to manufacture chemicals within the country. Nevertheless, we may note that the development of petro-chemicals depends on Naphtha crackers. This situation calls for special attention to the development of the chemical sector that constitutes one of the major portions of Pakistan’s import bill.
Table 9.1: Pakistan’s Imports
(US$ Million) Year Total Imports Import of Chemicals Chemicals Import
%age 1991-92 9253.3 1468.9 15.9 1992-93 9963.2 1493.9 15.0 1993-94 8561.6 1494.0 17.5 1994-95 10401.4 1587.4 15.3
1995-96 11804.8 2187.4 18.5 1996-97 11894.8 1981.4 16.7 1997-98 10116.4 1791.5 17.7 1998-99 9431.7 1812.0 19.2 1999-00 10309.4 1997.2 19.4 2000-01 10723.9 1903.9 17.7 2001-02 10403.8 1354.3 15.5 2002-03* 12006.25 1528.62 12.7
Source: EAC, Ministry of Industries and Production. * Pakistan Economic Survey 2003-04.
9.2 ISSUES AND CHALLENGES
Whereas chemical industry has increasing returns to scale, in Pakistan chemical industry is dominated by medium and small units. A large number of chemical units especially small units have been closed down due to a number of factors. These include use of traditional technology, non-availability of basic raw-materials, lack of strong R&D base and know-how.
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9.2.1 Inorganic Chemicals
Inorganic chemicals are normally derived from mineral base, which is still an under- developed sector in Pakistan. Several minerals are available in the country but they have not been properly explored. Salts of Sodium, Potassium, Magnesium, Barium, Chromium and Aluminum can be manufactured from the locally available ores if the infrastructure facilities at relevant mineral sites are developed. Presently large quantities of inorganic salts are being imported. Total imports of inorganic chemicals exceed Rs. 5 billion.
9.2.2 Organic Chemicals
Most of the raw materials and intermediates for dyes & pigments, paints & varnishes, pesticides and plastics & plasticizers are being imported. These raw materials and intermediates are mainly derived from petrochemicals, which have no base in Pakistan. For example, dyes & pigments are produced in Pakistan but they meet only partially the local demand, and most of the raw materials are imported for the industry. Similarly, active ingredients used in pesticides & insecticides are not produced locally and about 30 units involved in formulations are based on imported raw materials. Moreover, numerous units involved in the production of soaps and detergents, are heavily dependant on the imported tallow for soaps and alkyl benzene, sulfonic acid for the production of detergents. Progress in the chemical sector would be limited without the indigenous production of petrochemical building blocks like olefins (ethylene, propylene, butadiene) and basic aromatics like BTX (benzene, toluene and xylene).
The petrochemical group constitutes more than 76% of the total chemical group import bill of above Rs. 125 billion for the year 2001-02. Since organic chemicals are derived from petroleum, gas or agro based raw materials, and as such petrochemical complex is absolutely necessary.
The factors responsible for non-development of petrochemical industries include:
i). High depreciation of plant and equipment, costly spares and replacements, low capacity plants; batches type operation and not a continuous process, low productivity and the limited demand of the local market hinders in setting up economic size plants.
ii). Since the industry is dominated by small manufacturers, the imports costs are higher;
iii). Chemical industry is energy-intensive and power prices for industry are rather high;
iv). Non availability of feed stock for a reasonable size basic petrochemical production.
v). Complexity and high level of technology involved.
vi). High level of capital outlay required and non-availability of finances.
vii). Market size Limitations.
viii). Limited local manufacturing, engineering & design and technical back-up facilities.
ix). Uncertainties of International market and uncompetitiveness in the export market.
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9.3 AVAILABILITY OF RAW MATERIAL
9.3.1 Inorganic Chemicals
Pakistan is agricultural abundant country. The agricultural raw materials are not fully utilized in value added products while mineral raw materials are not exploited due to lack of infrastructure. There is a need to develop chemical industry based on agricultural and mineral raw materials. Pakistan being an agricultural country, these raw materials are available in abundance. The processing industry based on these raw materials has vast potential. Following agro based raw materials and by products are available for conversion to chemicals: molasses, bagasse, rice husk vegetable seeds, starches, cotton linters, wheat straw, wood, animal fats and bones.
9.3.2 Organic Chemicals
a) Crude Oil: Pakistan has inadequate crude oil resources. Pakistan’s present annual production of 3.1 million TOE (63,500 barrels per day), is only 30 percent of annual requirement of 10.4 million TOE.
b) Associated Gases: Associated gases like Ethane, Propane and Butane are produced from the oilfields in Punjab and Sindh. Currently, there are 0.6 trillion cubic ft(17.8 million TOE) reserves available and the production rate is 40 billion cubic Ft(1,143,000 TOE) per annum. These gases can be transformed to ethylene and propylene etc.
9.4 STRATEGIES AND POLICIES
Human resources may be developed so as to operate the refineries in efficient manner, and that would improve productivity levels of the chemical industries. There is a need for upgrading and periodically updating the skills through the process of continuous exposures and training tools. The interaction among the operating technical man power of various refineries to exchange/share experiences would be quite helpful. It will help the refinery for better functioning and updating its technologies.
The petrochemical industry is highly technology and capital-intensive. Changes in technology and raw materials have shifted regularly and frequently towards lower costs and competitive production, less energy consumption through better conversion efficiency, broader spectrum of product grades to meet specific needs as in case of detergents, reduction in pollution from the production technologies and so on.
9.4.1 Suggested Projects
9.4.1.1 Indigenous Manufacturing of Reverse Osmotic Membranes (ROM)
Reverse Osmotic Membranes are required for a variety of uses including domestic water purification facilities, medical machines, industrial water supply systems and laboratory uses. The costs of imported reverse osmotic membranes are high and it is important that common ROMs are manufactured indigenously in required quantities. The estimated cost of the project is Rs. 100 million per unit.
9.4.1.2 Fertilizers
Urea accounts for 71% and DAP 15% of total fertilizers consumed in Pakistan. National Fertilizer Development Center (NFDC) has estimated a growth rate of 2.5% for urea and 5% for DAP over the next ten years. There is a need to exploit the full potential of existing fertilizer industry. Necessary incentives need to be provided in view of heavy investment required in this sector.
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The supply and demand position of the fertilizer products, namely Urea, DAP, SOP and MOP for the next 10 years is given below:
Table 9.2: Supply/Demand Position
(‘000’ Tonnes) Urea DAP Year
Supply Demand Deficit/ Surplus
Supply Demand Deficit/ Surplus
SOP/MOP Demand
2001-02 4190 4178 12 67 970 -903 40 2002-03 4170 4282 -112 450 1019 -569 44 2003-04 4170 4390 -220 450 1069 -619 48 2004-05 4170 4499 -329 450 1123 -673 53 2005-06 4170 4612 -442 450 1179 -729 59 2006-07 4170 4727 -557 450 1238 -788 64 2007-08 4170 4845 -675 450 1300 -850 71 2008-09 4170 4966 -796 450 1365 -915 78 2009-10 4170 5090 -920 450 1433 -983 86 2010-11 4170 5218 -1048 450 1505 -1055 94 2011-12 4170 5348 -1178 450 1580 -1130 104 Source: EAC, Ministry of Industries and Production.
Table 9.2 shows that urea shortage by 2011-12 will be around 1.2 million MTPY and of DAP 1.13 million MTPY. Therefore two plants of urea and DAP each with average capacities of 600,000 MTPY shall be required to meet the future needs of the fertilizers. Two urea plants are estimated to cost approximately US$ 700 million while two plants of DAP can be established at around US$ 500 million. Therefore, a total investment of US$ 1.2 billion would be required in the next ten years.
9.4.1.3 Pesticides
The imports of pesticides exceeded Rs 6 billion during 2002-03. It is not possible to manufacture all active ingredients in the country because of the absence of petrochemical base and the lack of required R&D facilities. Some ingredients can be produced especially the basic chemicals to produce pesticides to be used on the cotton crop.
Several smaller plants needs to be set-up which produce and formulate different types of synthetic insecticides, fungicides, herbicides, rodenticides, fumigants, weedicides, organic (plant-based) pesticides for domestic and export needs. The estimated cost of this project is Rs. 100 million per unit.
Table 9.3: Data on Imports, Demand and Local Formulation of Pesticides Year Pesticides Imports
(M. Tons) Local Formulation
(M. Tons) Total Demand
(M. Tons) 1997 24,168 13,836 38,004 1998 22,765 18,811 41,576 1999 27,210 18,470 45,680 2000 19,764 41,535 61,299 2001 20,678 26,914 47,592 2002 27,099 42,794 69,893 2003 24,028 54,105 78,133
Source: EAC, 2004.
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9.4.1.4 Manufacturing of Fermentation Products
Pakistan as an agriculture country produce large quantities of organic biomass such as molasses, starch, cellulose, shrimp shells etc. This biomass can be used as raw material to produce value added chemicals such as industrial alcohols, citric acid, acetic acid, chitosine, etc. both for domestic and export markets. These industries are generally low-tech and low cost in nature. This is one of the sector in which Pakistan has definite comparative advantage over other countries.
9.4.1.5 Manufacture of Gum Rasin and Turpentine Oil
Vast forest of Pine trees exist in Hazara and Azad Kashmir. Gum from these trees can be used for the production of Gum Rasin and Turpentine oil. A mechanism needs to be evolved to encourage auctioning of Pine tree areas for extraction of Gum instead of cutting them. The local manufacturing can result in US$ 4 – 5 million saving of foreign exchange.
9.4.1.6 Essential Oils
There is variety of essential oils and they are used in perfume and food industry. The raw materials are leaves and flowers of natural plants and these are available in Pakistan. Due to the availability of flora and fauna, production of essential oils should be encouraged to substitute import of perfumes which are more than Rs 0.5 billion per year. High quality essential oils can also be exported, in substantial quantity.
9.4.1.7 Organic Chemicals from Molasses
About 2 million tons of molasses are available per annum and about 1 million tons is exported at a nominal rate of about Rs 2,000 per ton. Molasses is a by-product of local sugar industry and can be converted to value-added organic chemicals. The conversion of molasses to ethane can be the first step which will enhance value addition for sugar industry. Industrial alcohol, acetic acid, oxalic acid, citric acid, acetone, ether and pharmaceuticals can be produced from molasses. The estimated cost of this project is Rs. 6-7 billion.
9.4.1.8 Gasohol
Anhydrous Ethanol with increased concentration can be blended with gasoline. This blending is called gasohol and used as automobile fuel. Currently, there is no programme in the country to use ethyl alcohol as gasohol in the automobiles. The present consumption of petrol stands at 1.27 million tons per year. For a gasohol programme, with 20% substitution of petrol by ethyl alcohol, there will be a significant impact on the import bill of crude oil.
9.4.1.9 Polyester Fiber
Assuming a conservative annual growth rate of 8% up to the year 2011, almost 500,000 tons of polyester staple fiber (PSF) capacity is required to be added to the existing capacity to meet the growing demand. The minimum economic size of the PSF plant is 150,000 tons, and therefore at least three additional PSF plants can come on stream to absorb the demand. The additional capacity of PSF will also make feasible the establishment of a 300,000 MTPY capacity of PTA plant. A total investment of approximately US$ 511 million will be required by the year 2011 for installing additional capacity of 500,000 tons.
9.4.1.10 Hydrogen Peroxide
Hydrogen peroxide is widely used in textile processing and in excess of 17,000 Metric tons are being imported every year. There is scope to establish a modern technology plant of about 17,000 MTPY capacity at an estimated cost of US$21 million. Hydrogen peroxide if set up within Ammonia complex can save some capital cost.
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9.4.1.11 Manufacturing of Textile Dyes and Chemicals
Textile industry is the major contributor in national export. Most of the textile dyes and other chemicals are imported from other countries including India and China. As a result the textile Industry is loosing competitiveness in global market place. There is need of the establishment of at least four major textile dyes manufacturing facilities in Pakistan. The estimated cost of this project is about Rs. 250 million per unit.
9.4.1.12 Titanium Dioxide
Titanium dioxide pigment basically consists of two industrial grades (i) Rutile grade used for the manufacture of paints and plastics and (ii) Anatase grade used in Polyester Fiber and paper industry. It seems feasible to establish a 10,000 MTPY facility to manufacture anatase grade to cater needs of polyester fiber industry of Pakistan. Sulfuric acid one of the major raw materials is being manufactured in Pakistan. The capital cost is estimated to be around US$ 35 million.
9.4.1.13 Mineral Resources
Inorganic chemicals are mainly based on mineral resources and are used for producing intermediate and final products. The main mineral reserves of Pakistan are coal, rock phosphate, iron ore, magnesite, chromite, gypsum, barite, rock salt and copper ore. These mineral reserves may be exploited for downstream manufacture of inorganic chemicals and development of indigenous technologies for preparation of chemicals for local industries based upon indigenously available economic mineral resources/ ores. The estimated cost is around Rs. 8-10 billion.
9.4.1.14 Inorganic Salts
Large quantities of inorganic chemicals are being imported totaling Rs 5.8 billion. These chemicals include selected inorganic salts worth Rs 1 billion. Producing inorganic salts locally can save large foreign exchange. The minerals for these inorganic salts are available in Pakistan and they are relatively easier to manufacture. The costs for such projects are considered to be low.
9.4.1.15 Extra Pure Salt Manufacturing Facilities
Pakistan is blessed with tremendous mineral resources including large reservoirs of salts. These salts are required for value-added medicinal preparations, industrial and domestic uses. At least four of such units need to be established in Pakistan. The estimated cost of each unit is around Rs.100 million.
9.4.1.16 Manufacture of Basic Chromium Sulphate from Chromite
Presently most of the demand for Basic Chromium Sulphate (BCS) used for leather tanning, is being met from imports. The entire local production of BCS is confined to the manufacture of BCS from imported sodium dichromate. The value addition in the case of BCS to be manufactured from Chromite is far greater than BCS produced from sodium dichromate. Moreover the foreign exchange savings are much higher in the BCS production from Chromite as compared to BCS produced from sodium dichromate.
9.4.1.17 Manufacture of Potassium Chlorate (KCLO3)
The present demand for KCL03 is about 3000 MTPY. The entire demand in the match industry is being met through imports. The manufacturing process for KCLO3 is based on the electrolysis of potassium chloride in the presence of sodium chloride. The total project cost of an economic sized plant with a capacity of 3000 MTPY is broadly estimated at Rs. 180-200 million.
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9.4.1.18 Coal
A total of 185,173 million tons of estimated coal reserves are available in Pakistan with minable reserves of 1,982 million tons. Thar reserves in Sindh Province are 175,506 million tons out of which 1,620 million tons are minable. This coal having sulfur less than 3% and ash content with a range of 2.9 to 11.5% appear suitable for production of petrochemicals. Value addition component in the chemical industry is high; it increases for commodity products to specialty and fine chemicals and it is normally 10 to 200 folds taking crude oil value as the base. Pakistan can exploit this situation only through vertical and horizontal integration.
Local gas and coal reserves are in abundance and they are of reasonable quality. Coal gasification technology to manufacture petrochemicals is being used in USA, European countries and South Africa. Technologies are available to manufacture chemicals from coal. Production of value-added chemicals can make the project economically feasible. A suitable technology may therefore, be acquired and used in Pakistan for Thar and Lakhra coal reserves.
9.4.1.19 Smokeless Coal for fuel
Smokeless coal can be produced by proper blending of Coal, Calcium Oxide and bagasse, all are abundantly available in Pakistan. This mixture does not produce smoke or smell and therefore it is more appropriate as domestic and industrial fuel.
9.4.1.20 Vinyl Acetate Monomer (VAM)
VAM is used for the manufacture of Poly Vinyl Acetate (PVA) Emulsion. The current requirement of PVA Emulsion in the country is around 35,000 MTPY. VAM requirement for this is around 15,000 MTPY which is currently being imported.
9.4.1.21 Butyl Acrylate
Butyl Acrylate is used for the manufacture of acrylic binders used in textile, leather and paint industries. The current requirement of acrylic binders in the country is around 20,000 M. Tons. For this about 10,000 MTPY of butyl acrylate is required which is being imported. Both VAM and butyl acrylate can be manufactured locally if the feedstock i.e. propylene and ethylene is made available.
9.4.1.22 Naphtha Cracker
If chemical industry is to be established in Pakistan, it is imperative that a fully integrated industry with large-scale plants is set up and a naphtha cracker is set up in the country. This facility is critically important for the indigenous manufacturing of a large number of chemicals and pharmaceuticals. This includes manufacturing of rubber, polymers (for example PVC, LPE/HDPE, Polyester, PET etc.), Synthetic Fibers (Nylon, PSF, PFY, etc.), basic chemicals (xylene, toluene, ethylene glycol, ethylene, benzene etc.) Pharmaceutical raw material and other industrial intermediates (MEG, PAN, Lab etc.).
A world-scale cracker should be established in Pakistan, along with major down-stream plants in the first phase. Additional plants would be set-up subsequently. Raw materials made available by naphtha cracker include ethylene, propylene, butadiene, butylenes and aromatic hydrocarbons. With these building blocks a large number of chemicals can be produced, which include plastics, synthetic rubbers, fertilizers, explosives, solvents, dyes, pharmaceuticals, etc. This will allow establishment of a fully integrated chemical industry in Pakistan. The estimated cost of this project is Rs. 72 billion.
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9.4.2 Action Plan
• A world scale naphtha cracker requires more than a million tons of naphtha per year which may be made available through restructuring of existing refineries and new refineries.
• The local chemical industry should be based both on the domestic demand as well as export of surplus production to maintain full capacity utilization of the plant.
• There is need to examine optimum utilization of the gas condensates presently being used as domestic fuel, as alternative feed stock for the petrochemical industry.
• Basic research should be handled separately by research institutes, which have the expertise, resources and facilities to undertake such research. These institutes be funded adequately to do a high quality job. Rest of R&D should be focused on applied technology and transfer of technology integrated closely with the national industrial development objectives.
• The capabilities of the existing infrastructure of R&D, design engineering and training should be assessed, their objectives and areas of activities be rationalized.
• The interaction of the local chemical industry and R&D centres must be created in order to proceed to indigenisation of technology.
• The R&D Institutions should be supported & strengthened and their linkage with industry should be systematized.
Short Term Measures
i) A detailed cause-effect analysis of the plants over the last few years of operation;
ii) Analysing the best achieved performance and the responsible factor and bottleneck areas;
iii) Exploring the adaptability of current operating and maintenance trends in the chemical industry;
iv) Evaluating adaptability from the modules of the latest technologies; and
v) Observing a systematized maintenance schedule leading to better plant availability.
Long Term Measures
i) Increasing the plant capacity, improved process control, reducing operational and maintenance costs, improving power and cooling water usage efficiencies, improving product quality and thus reducing fixed costs;
ii) The industry and Government should lay more emphasis on technology as an instrument of growth rather than just addition of productive capacities;
iii) Innovations towards high performance products, concentrated brands and non-dusting brands;
iv) Development of precise testing methods for determination of unwanted toxic impurit ies at very low concentration; and
v) Exploring the use of activated carbon for liquid effluents of dyestuff industry and its marketing.
9.5 PHARMACEUTICAL SECTOR
The pharmaceutical industry in Pakistan comprises of national and multinational companies. Presently, there are about 286 pharmaceutical manufacturing companies including 30
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multinationals, which are meeting around 80% of the country’s requirement. The investment in the industry is around Rs.3 billion annually.
Whereas Pakistan has attained a high degree of self-sufficiency in the formulation and packaging of finished pharmaceutical products, the basic manufacturing of ingredients is very small. About 90% of active ingredients is imported. Pakistan needs to develop capacity of the essential ingredients especially where local resources are available.
Pharmaceuticals are specific types of fine chemicals; i.e. materials responsible for giving the products a specific property in terms of treating a particular disease or physical condition. World-wide, pharmaceuticals add up to an industry with sales of about $130 billion a year, 75% of which is accounted for by sales within the developed countries of Western Europe, North America and East Asia. About $100 billion of these sales are from prescription-only drugs; that is, pharmaceuticals that can be obtained only on the prescription of a doctor. The rest of the sales are derived from non-prescription or over-the-counter medicines, which are recognised therapeutic agents, but which can be obtained from retail outlets, mainly pharmacies. The drugs industry can be divided up further into hundreds of different product classifications depending on the particular ailment (such as heart disease, arthritis, cancer and bacteria -borne infections) being treated.
The pharmaceuticals are mainly derived from: Organic chemical, Inorganic chemicals, Phytochemicals, Fermentation products, and Products of animal origin.
9.5.1 Issues and Challenges
While the market is increasing at a rate of about 20% per annum with a relatively high level of per capita consumption of pharmaceuticals, about 50% of the population has no access to modern medicine. In the last few years the number of registered pharmaceutical preparations has shown an unprecedented increase in Pakistan. However, size of the market places constraints on the domestic industry's ability to compete in the export market, especially in the area of bulk drugs, where competitiveness is almost purely determined by economies of scale. The bulk drugs market is characterized by intense competition. Most of the patent molecules are primary commodities rather than value-added products.
Globalization is a major challenge for the domestic pharmaceutical industry. The intellectual property rights will formulate the rules. Due to merger and acquisitions, the large international pharmaceuticals would become even larger. A serious effort is required to build up formulation sector as a leading source of export earnings for Pakistan in the future to face all the challenges of post WTO regime.
9.5.2 Strategies, Objective and Targets:
The major thrust areas of the pharmaceutical sciences in Pakistan can be defined as Pharmaceuticals and Drugs, Diagnosis pharmaceuticals, Phytopharmaceutics, Veterinary Pharmaceutics, and alternative medic ines (Homeopathy, Biochemical). Pakistan may focus on:
1. Manufacturing the fermentation products;
2. Manufacturing of drugs based on slaughterhouse waste- such as plasma substitutes, insulin, pituitary extract, oxytocin etc.;
3. Inorganic drugs such as magnesium trisilicate, aluminum hydroxide gel, attapulgite, ferrous salts, kaolin, sodium alginate etc.; and
4. Phytochemicals such as opium derivatives [codeine, papaverine, morphine], sylimerin, aescin, isaphagula husks etc. For this objective, the plants need to be cultivated, and standardized on scientific grounds.
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5. Organic drugs based on imported intermediates. As UNIDO & UNDP have identified about twenty essential drugs for developing countries with the details of the manufacturing plants and their sources of supply.
To promote and regulate the local pharmaceutical industry so that the industry may positively contribute towards the implementation of the objectives of the national pharmaceutical policy; the local pharmaceutical industry should be regulated through the Medicines Control Authority into licensed manufacturers, wholesalers and retail pharmacies.
9.5.2.1 Strategies
• Appropriate training on rational use of drugs should be provided to all healthcare personnel involved in the diagnosis, prescribing, dispensing and administration of drugs;
• Training curricula for health personnel should be assessed and reviewed to ensure sufficient exposure to the concepts of primary health car;
• The curricula should include non-drug therapy, communication skills and patient history;
• Advertising and promotion of drugs should be of high professional standards, the Medicines Control Authority should establish ethical criteria and guidelines for drug promotion and advertising;
• There should be a proper monitoring system to check the quality and security of drugs and medical supplies from the time of receipt into stock to the time of issue to patients;
• There should be periodic visits to check the quality of stored drugs in the private and
public sectors facilities to make sure they are in good condition;
• Appropriate measures should be taken for the efficient, timely and equitable distribution of essential drugs, vaccines to the hospitals;
• In the public sector, the relevant ministries should provide adequate transportation, communication and personnel necessary to maintain an efficient drug distribution system;
• The Authorities should monitor all drug distribution activities in the public and private sector to ensure compliance with the requirements of the Medicines;
• Mechanisms to rationalise drug pricing in the public and private sector should be implemented;
• Drug pricing should be monitored at all stages of the distribution process; and
• The use of generic and non-proprietary names should be promoted so as to reduce medicines costs and drug expenditure.
9.5.3 Action Plan
9.5.3.1 Short Term Programmes
• Human resource development is a pre-requisite for the establishment of Pharma industry in Pakistan;
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• There is a need to improve the level of education and training to produce adequate pharmaceutical personnel to cover both public and private sector;
• A diploma course in pharmacy technology should be introduced in the faculties of Pharmacy;
• Dispensers should be provided training through the diploma course to pharmacy technician level;
• There should be courses for pharmacists for further refinement in their fields;
• The public sector universities through Higher Education Commission need to be upgraded to postgraduate levels of research and education institutes both in pharmacy and medicine, and Human resource centers within these institutes be developed for the training of Pharmaceutical professionals; and
• Research Institutes of Pharmaceutical Sciences - a fully equipped laboratory to undertake basic research be established in each province in the field of pharmaceutical drugs and medicine for the diseases prevention.
9.5.3.2 Medium Term Programmes Establishment of R&D Centres: Centers of pharmaceutical and drug discovery and
experimental therapeutics be established as a multi-center in each province for innovative research. The public sector universities should establish research hospitals within their vicinity.
Establishment of Testing/Certifying Laboratories Approved by WHO: Laboratories be established and approved by WHO so that they can certify:
• test samples for export in various disciplines; • test samples from market to evaluate quality; • monitor and evaluate the status of laboratory in the region; • provide training to the technical staff of PPMA members; and • provide toxicity testing facility.
Initiate and Strengthen Research and Development Programmes
• High Quality Raw Material (Medicinal Herbs): This could be the starting point for investment in R&D. Pakistan is a major exporter of raw herbs and medicinal plants. However most of these plants are exported without any quality standards at very low prices. R&D investment in this area should focus on assessing and improving the quality of currently available raw materials, cultivation and conservation techniques and organic farming.
• Standardized Extracts: Standardized extracts are value added products of medicinal plants. Pakistan may invest on developing cost effective extraction technologies, raw material analysis and standardization methods for commercialization.
• Evidence Based Herbal Medicines: True benefit of value addition can only be utilized through export of finished herbal products. However for products of Pakistan origin to find a suitable place in the global market they have to be supported by extensive pharmacological and clinical evidence. In addition these products can also play a vital role in addressing the health care needs of local population at competitive prices. Funds should be utilized for conducting pharmacological and clinical investigations on various medicinal plants which could lead to new products or strengthening the scientific basis for existing products.
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• Tibb-e-Unani Medicines: Tibb-e-Unani medicines provide Pakistan with a unique advantage of traditional medicine system for which all the inputs are available locally. Developing this system of medicine on modern scientific grounds will enable us to create a niche market for unique products and services e.g. Chinese Herbal Medicines from China or Ayurveda from India. Obviously at home scientifically developed Tibb-e-Unani system will have an enormous contribution in the prevention and treatment of chronic diseases at affordable cost.
• Development and promotion of herbal medicine would require: Documentation of ethno-pharmacopoeia, cultivation and conversation of medicinal plants, collection of medicinal plants. Identify, develop and recognize Testing Laboratories for Traditional Medicine on scientific guidelines and international standards. This will include toxicology, clinical efficacy and follow up. Quality Control before marketing of the standardized herbal extract and their exports. Establishment of a certifying laboratory capable of issuance of a certificate of suitability that the medicine does not contain any critical impurities and toxicologically critical substances.
Structure – Activity Relationships (SAR)
The structural modification of the existing molecule can result in more potent and safer moieties. The development of such analogues and their screening for the pharmacological activities should be encouraged.
Development of formulation: The formulation industry in Pakistan is highly competitive; with over 350 domestic manufacturers competing with imported finished products from cost-based competitors like China, Thailand and Korea. In the last decade the local industry has made sufficient progress both in manufacturing standards as well as in marketing skills.
A focused and sustained effort is required to build up the formulation sector as a leading source of export earnings for Pakistan in the future. This effort would require establishing internationally accredited clinical research centres.
Pakistan is rich in resources, which can be used for the production of pharmaceutical raw material both for domestic consumption and for export market. The proper utilization of these resources will result in substantial foreign exchange savings.
a) Animal By-products (Source of Gelatin, Insulin) b) Fermentation Process (Source of citric acid, lactic acid) c) Biomass Production d) Minerals (Source of calcium resource) e) Monoclonal Antibodies f) Hybridization g) Production of vaccines
9.5.3.3 Long Term Programmes
• Establishment of manufacturing/engineering laboratories for fabrication and manufacturing of basic equipment required in pharmaceutical industry.
• Establish collaboration with other research laboratories in the SAARC countries.
• Offer substantial fiscal incentives (not subsidies) to local firms looking to invest and raise their manufacturing hardware and software to the levels of export markets such as the United States FDA, the European Union, Australian and Japanese regulatory standards. These incentives should include:
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o Duty-free import of machinery and capital equipment for companies upgrading to FDA standards.
o Continuing Education and International Exposure through regular Sponsorships for Industry technical staff and University Faculty and Ph.D. students to Participate in International Industry Seminars, Conferences & Symposia.
• A committee of experts be formed to monitor the development and progress of R&D activities.
• Patents and Intellectual Property Rights (IPR): Any new research carried out by the scientists should be given protection by international patenting and the Government should support in every aspect.
• Traditional practices are usually a starting point for the development of drugs. Scientists who make some discoveries/inventions, must be given due reward for the inventions. The invented/discovered products should be licensed/ patented with the name of discoverer/inventor.
• Regulatory Environment: The aim of the Ministry of Health is to ensure provision of affordable, standardized drugs to the population of Pakistan. The industry's aim is to grow and become internationally competitive. Instead of controlling the price of each and every one of the thousands of brands registered in the country, the Ministry should deregulate the sector and ensure reduction in prices and improvement in quality through competition rather than regulation.
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BIBLIOGRAPHY Finance Division, “Pakistan Economic Survey 2002-03”. Government of Pakistan,
Islamabad.
Finance Division, “Pakistan Economic Survey 2003-04”. Government of Pakistan, Islamabad.
Hamid, Ahmad Sarji Abdul, “Malaysia’s Vision 2020: Understanding the Concept Implications and Challenges”. Pelanduk Publications (M) Sdn Bhd, Malaysia.
Khan, Munir A. (1996), “Chemicals, Pharmaceuticals, Biotechnology, Food & Agriculture, Edible Oils, Cotton & Livestock.” Prime Minister’s High Power Committee on S&T, Sub Committees Reports (Manpower/Software/Defence etc.) Vol.9 to 15.
Khan, Usman Ghani (2000), “Herbal Medicine Industry in Pakistan: Issues Product Manufacturing Quality Control Research Development”. Research Institute of Indusyunic Medicine, Karachi.
Ministry of Industries & Production (2004), “Pakistan Investment Guide”. Experts Advisory Cell, Ministry of Industries & Production, Islamabad.
Ministry of Industries & Production (2003), “Prospects of Chemical Industry in Pakistan”. Experts Advisory Cell, Ministry of Industries & Production, Islamabad.
Nawaz Muhammad (2003), “Proposal for the Establishment of National Institute of Pharmaceutical Sciences (NIPS): A Center for Advanced Studies in Pharmaceutical Sciences”. Department of Physiology & Pharmacology, University of Agriculture, Faisalabad.
Pakistan Council for Science & Technology (2002), “Report of the Peer Review Committee on Chemistry and Biochemistry”. Phase-III, Report-4, PCST, Islamabad, October 2002.
Siddiqui, Bina S. et.al. (2004) “Draft Report of the National Committee on Pharmaceutical and Drugs”. Pakistan Council for Science and Technology, Islamabad, March 14, 2004.
TIFAC (1996), “Chemical Process Industries: Technology Vision 2020, TIFAC:V:08:IX:ES”. New Delhi, India.
TIFAC (1996), “Chemical Process Industries: Technology Vision 2020, TIFAC:V:08:IX:DA.” New Delhi, Ind ia.
TIFAC (1996), “Chemical Process Industries: Technology Vision 2020, TIFAC:V:08:IX:DR(1).” New Delhi, India.
TIFAC (1996), “Chemical Process Industries: Technology Vision 2020, TIFAC:V:08:IX:DR(2).” New Delhi, India.
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Annexure 9.1
Projects: Chemical Process Industry Action Cost Time Agency Impact
Naphtha Cracker (this facility is critically important for the indigenous manufacturing of a large number of chemicals and pharmaceuticals.) This include manufacturing of rubber, polymers (like PVC, LDPE/HDPE, polyester, PET etc.) Synthetic fibers (Nylon, PSF, PFY, etc.), basic chemicals (xylens, toluene, ethylene glycol, ethylene, benzene etc.) pharmaceutical raw material (MEG, PAN, LAB, etc.)
Rs.72 billion Long-Term Ministry of Petroleum and Natural Resources in partnership of private sector
Establishment of a fully integrated chemical industry in Pakistan which would eventually lead to the higher economic growth.
Manufacturing of Bio-Pesticides
Rs.100 million per industry
Short- Term Private sector Self-sufficiency and development of the agriculture sector.
Manufacturing of Textile dyes and Chemicals
Rs.250 million per unit
Medium- Term
Private sector with the support of MOIP
Development of the Textile related chemical sector.
Fertilizer Plants (two plants of Urea and DAP with average capacity of 600,000 MTPY would be required to meet the growing demand of fertilizer.)
Two Urea Plants = Rs.66 billion Two Plants of DAP= Rs.30 billion Total Cost=Rs.96 billion
Short- Term Private sector with the support of MOIP
Foreign exchange saving and development of the agriculture sector.
Inorganic Salts (these can be manufactured to domestic minerals e.g. sodium sulfide, calcium carbonate, iron sulfate etc.)
Rs.300 million Medium- Term
Private sector with the help of Ministry of Petroleum and Natural Resources
Producing Inorganic Salts locally can save large foreign exchange
Manufacturing of Fermentation Products (i.e. Citric Acid, Acetic Acid, Chitosine, Antibiotics, Cortico-Steroids etc.)
Rs.25-50 million per industry
Short-Term EPB Development of the Chemical Sector would lead to the higher economic growth.
Manufacture of Gum Resin and Turpentine Oil
Rs.25 million Short-term Private sector with the support of Ministry of Mineral Resources.
Foreign exchange saving.
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Action Cost Time Agency Impact Essential Oils (local manufacturing of essential oils would result in manufacturing of perfumes in the country)
Cost: Rs.600 million
Short-term Private sector with the support of MOIP
Foreign exchange saving.
Gasohol (i.e. Anhydrous Ethanol with increased concentration can be blended with gasoline)
Rs.500 million per unit
Short-term Private sector with the support of Ministry of Petroleum and Natural Resources.
Reduction in the import bill of crude oil.
Polyester Staple Fiber (due to high growth in this sector, new plants of 150,000 MTPY capacity are required to be setup)
Rs.55 billion Medium term MOIP in partnership of private sector.
Self-sufficiency
Organic chemicals from Molasses (citric acid, acetic acid, oxalic acid, acetone, pharmaceuticals, ether, ethyl acetate, can be produced from molasses)
Rs.1.5 billion Short term Private sector with the support of MOIP
Self-sufficiency in essential raw materials
Hydrogen Peroxide (due to its extensive use in textile, there is a need to setup a plant of capacity 20,000 MT per annum)
Rs.1.2 billion Short-term Private sector with the support of MOIP
Development of an integrated chemical industry; Foreign exchange saving.
Titanium Dioxide (due to local availability of a raw materials like sulfric acid and ilmenite, a 10,000 MTPY capacity plant of anatase grade titanium dioxide can be established)
Rs.2 billion Short-term Private sector with the support of MOIP
Foreign exchange saving.
Mineral Resources (i.e. coal, rock, phosphate, iron ore, magnesite, chromite, gypsum, barite rock salt and copper ore, these mineral reserves may be exploited for down stream manufacturing of inorganic chemicals and development of indigenous technologies for preparation of chemicals for local industry)
Rs.8-10 billion Medium-term Private sector with the help of MOIP
Production base for downstream chemical industry
Manufacturing of Drugs based on Slaughterhouse Waste (i.e. Plasma Substitutes, Insulin, Pituitary Extract, Oxytocin etc.)
Rs. 700 millions Short-Term Private sector with the help of Ministry of Health
Self-sufficiency in Drugs.
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Action Cost Time Agency Impact Inorganic Drugs (i.e. Magnesium Trisilicate, Aluminium Hydroxide Gel, Attapulgite, Ferrous Salts, Kaolin, Sodium Alginate etc.)
Rs. 500 million Short-Term Private sector with the help of Ministry of Health
Self-sufficiency in Drugs.
Phytochemicals such as opium derivatives [i.e. codeine, papaverine, morphine), Sylimerin, Aescin, Isaphagula Husks]
Rs.2 billion Medium-Term Private sector with the help of HEC
Foreign exchange saving.
Extra Pure Salt Manufacturing Facilities (these salts are required for value-added medicinal preparations, industrial and domestic uses)
Rs.100 million per unit
Medium-Term Private sector with the help of Ministry of Mineral Resources
Development of the Mineral Sector would enhance the productivity of the chemical processing industry.
Manufacturing of Reverse Osmotic Membranes (ROM, these are required for a variety of uses including domestic water purification facilities, medical machines, industrial water supply systems and laboratory uses etc.)
Rs.100 million per unit
Medium-Term Private sector with the help of MOIP
Reduced burden on the exchequer of the country.
Development and Promotion of Herbal Medicine (i.e. documentation of ethno-pharmacopoeia, cultivation and conversation of medicinal plants, collection of medicinal plants).
Rs.150 million Short-term Private sector with the help of HEC.
Broaden the domestic pharmaceutical base
Vaccine production Rs.1 billion Short-term Private sector with the help of Ministry of Health.
Self-sufficiency in Vaccine.
Production of Diagnostic Kits Rs.100 million Short-term Private sector with the help of MOIP.
Foreign exchange saving.
Drugs for Tropical Diseases
Rs.100 million Short-term Private sector with the help of Ministry of Health.
Self-sufficiency in Drugs will lead to the higher economic growth.
Antibiotics by Fermentation Rs. 1billion Short-term Private sector with the help of Ministry of Health
Broaden the pharmaceutical base.
Establishment of Testing/Certifying Labs
Rs.500 million Medium-Term Private sector with the help of Ministry of Health
Improved quality.
Establishment of R&D Centres
Rs.1.5 billion Medium-Term Private sector with the help of HEC.
Improved efficiency.
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Annexure 9.2
SDP Financial Allocation for Chemicals (Rs. in Million)
Period Total S&T HRD/ Skill
2005-06 2725 2100 625
2006-07 3185 2247 938
2007-08 3827 2427 1400
2008-09 4732 2623 2109
2009-10 6243 2838 3405
Total 20712 12235 8477
2010-11 7404 3077 4327
2011-12 8009 3335 4674
2012-13 8680 3622 5059
2013-14 9412 3934 5479
2014-15 10199 4280 5919
Total 43704 18247 25457
2015-16 11113 4665 6448
2016-17 12142 5094 7048
2017-18 13212 5573 7639
2018-19 14309 6052 8256
2019-20 15497 6621 8876 Total 66273 28005 38268
Note: The figures for 2005-06 to 2009-10 may not exactly be equal to the total cost of the projects because of throw forward.
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CHAPTER 10
ENGINEERING INDUSTRY OF PAKISTAN
Zafar Mueen Nasir
Promotion of engineering industry is vitally important as it has strong forward and backward linkages which help in accelerating the industrialization process. The present share of engineering industry in meeting national requirements is a mere 25% while the rest is met through imports which have almost doubled over the last 8 years.
The strategic focus requires bridging the widening technological gap, infrastructure development (financial and physical), and integration with global production systems by manufacturing quality goods of at competitive prices for domestic and international markets.
This study argues that we should concentrate on manufacturing surgical instruments, medical instruments and appliances, electric fans, ceramics, non-electrical machinery such as machine tools, mould and dies, industrial machines including textile machinery, electrical machinery, agricultural machinery and automotives.
10.1 INTRODUCTION
Engineering industry is one of the most dynamic industries in the world having great potential for growth. It comprises base metals, metal products, mechanical and transport equipment, electrical equipment, electronics, non-metals, design and engineering services. Because of changes consumer preferences, competitive pressures and the phenomenal speed of technological change, the engineering industry has undergone major transformations all over the world. Because of sharp growth in demand as well as obsolescence, investment required for this sector is very high. Opportunities in the engineering sector are immense but so is the competition because developed countries have attained an edge over others.
Promotion of indigenous capital goods industry is at the heart of the industrialization plans of various countries because of its strong forward and backward linkages which accelerate the industrialization process. Opportunities are expanding as new products, machines and production techniques are introduced virtually every day. The share of engineering industry in the overall world trade has shown rapid increase from 55% in 1990 to 63% in 2002 (see Table 10.1). Without a thriving capital goods industry, no country can achieve a high rate of growth.
Table 10.1: The World Trade in Different Products (billion) Year 1990 Year 2002 Products
Volume % Volume %
All products $ 3,337 100 $ 6272 100 Textile Products 210 6.3 376 6.0 Agricultural Products 400 12.0 565 9.0 Mining products/ Fuels 467 14.0 815 13.0 Chemicals 300 9.0 565 9.0 Miscellaneous 100 3.0 188 3.0 Engineering products 1582 55.0 3954 63.0
Source: WTO database 2003.
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The major players in the production of engineering goods are the industrialized countries accounting for 76.6 percent share while the newly industrialized countries for 19.9 percent of the world production of engineering goods. In comparison, the share of developing countries is just 3.4 percent (see Table 10.2).
Table 10.2: Share of Developed & Developing Countries in Production of Engineering Goods Products and Countries Industrialized countries Newly Industrialized Others No. of Countries 48 7 129 Steel 76.1 17.7 6.2 Mechanical Goods 94.7 4.1 1.2 Elect Goods 89.3 8.3 2.4 Transport Equipment 83.5 13.2 3.3 Average Share 76.6 19.9 3.4
Source: WTO database 2003.
10.2 ENGINEERING INDUSTRIES OF JAPAN AND NEWLY INDUSTRIALIZED COUNTRIES
Pakistan can learn from the experience of different countries which developed their
engineering sector from scratch. The experience of Japan in this regard can act as a model in developing engineering sector. In Japan, it started with the establishment of the Ministry of Economy, Trade and Industry (METI) which brought forward the vision and challenging targets for different sectors including high priority engineering sector. The physical and human infrastructure needed for achieving the targets was developed with innovative and faster pace. Experts of different fields were invited from European countries to train the workforce on latest skills and techniques of production. These advisors were placed in training institutes, learning centers, R and D establishments and universities all over the country. At the same time Japan sent thousands of Japanese engineers to Europe to study industrialization process. To upgrade the technological know-how and production techniques, Japan repeated this exercise with the help of American assistance later on. This investment in human capital played significant role in the promotion of engineering industry and Japan emerged as the second largest economy of the world in a short span of time.
The experience of newly industrialized countries (NICs) like South Korea, China, Singapore, Malaysia, and Indonesia is not any different from Japan and engineering sector played an astounding role in the development of these countries. The engineering sector was given the top priority in the development vision with the realization that the only viable path to prosperity is the development of engineering sector on modern lines with broad base. The government machinery was restructured to help industry in achieving targets. A number of specific initiatives were taken by these countries for the promotion of engineering sector and economic policies were tailored accordingly. The economic policies were flexible enough to accommodate the changes taking place in the world trade.
The case of Malaysia provides a good model for studying the changing role of economic policies in shaping the country into a modern industrial state. Malaysia started with import substitution policies in 1960 but did not continue with them for long by realizing that the real impetus for development lies in export market. In the 1970s liberal export incentives were provided to capture the share in growing export market. The production capacity was increased
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by diverting investment to engineering industry through the similar incentive mechanism. In 1980s and 1990s, the resource based industries were prioritized in the national policies to broaden the industrial base for high value added manufacturing industries. This resulted into dramatic increase in Malaysian exports which touched the significant mark of US $73 billion in year 2001. More interesting achievement was the share of manufactured and engineering goods in total Malaysian exports which increased to 54 percent and 22 percent respectively from insignificant share in 60s (see table 10.3)19.
Table 10.3: Economic Performance of Different Countries
Economic Indicators Korea Malaysia Pakistan
GDP US $ Billion 457 390 95 Manufacturing Value Added % of GDP 29 32 17 Population (Millions) 48 23 148 GDP per Capita ($) 16,956 9520 652 Exports Per capita ($) 4206 3650 67 Engineering Exports per capita ($) 2679 2600 2 High Tech Exports as % of Manufacturing 54 27 0.4
Source; WTO database 2003
Although the NICs developed their technological base on borrowed technologies from developed countries but these countries wasted no time in gestation and learning process. They not only used these technologies efficiently but also improved upon them to compete in the international market by making them more efficient and cost effective. The driving force behind this achievement was the well educated and trained manpower which complemented modern machines in the production process. Each country allocated considerable resources in the national budgets for education and training of their labor force. The major emphasis was on the basic and technical education to create a workforce which can run sophisticated machines. At the same time, significant resources were allocated to the production of highly skilled and trained engineers for achieving faster growth in the development of their engineering sector.20
The experience of NICs shows that these countries focused in the engineering sector as a vehicle for economic development. There was clear focus on acquisition of technology from abroad and development of local technological base through joint ventures and technology licensing agreements. Joint ventures also provided much needed capital inflows to these countries. The policy makers identified all the needed institutional and policy frameworks which were used very effectively to enable the development of the local engineering industry. Another important step taken by these countries was the coordination of different departments to complement the development process rather than hampering the efforts of each other.
To achieve their goals, these countries went beyond the fundamentals and intervened in all areas with varying degrees of intensity to alter market incentives. Generous incentives were provided
19 The success of the engineering industry and therefore the growth of the manufacturing sector have been reflected in the exports of Korea also. Machinery and transportation equipment exports for Korea had risen from 7% of total exports in 1970 to more than 44% by 2001. Koran exports have been fueled by rising productivity levels as real output per employee has increased by 380% from 1970 to 2001. 20 For example, in Korea, the engineers increased by tenfold between 1960 and 1980 while managerial workers doubled between 1960 and 1980 while high quality engineers increased by tenfold.
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for increasing the share of manufactured exports. These included subsidized credit, investment licenses on credit; rationed credit, the access to imported intermediate inputs at international prices, and controlled interest rates. The foreign exchange access was also linked with export targets. These countries gave liberal incentives for technology development, human resource development and R and D activities. These incentives were in the form of soft loans, matching grants and investment funds to selected industries. Moreover technical institutions were linked with industries to train manpower that was need by the industry. Government also extended its support for market development through coordination, support services and financial help.
Apart from above, other important steps taken by these countries for achieving high economic growth included the policies of equitable distribution of income, increasing integrity of the banking system, increasing participation of women in the labor market and devising effective system of public administration. These countries used a highly competent team of technocrats that was insulated from political pressures as they believed that merit breeds honesty and integrity.
10.3 PAKISTAN’S ENGINEERING SECTOR
The progress of Pakistan’s engineering sector has been less than satisfactory. The contribution of engineering industry to GDP is currently only $ 2 billion and it provides employment to a mere 600,000 people. Pakistan saves $ 3.75 billion per annum through import substitution. The rising trade deficit which is presently more than $3 billion is attributed mainly to imports of engineering sector which is more than $2 billion (Rs. 132 billion).
The present share of the engineering industry in meeting the total demand is merely 25% while the remaining is met through imports which have almost doubled over the last 8 years. Its share in total imports has varied from 33% to 42%. The share of engineering goods in Pakistan’s exports is only 3%. Pakistan exports $ 0.27 billion worth of engineering goods which is negligible share of the world trade. Major areas of imports include equipment for the textile industry, energy sector, cement plants, agricultural machinery, electrical machinery and the automobiles etc. The potential to increase the production of engineering industry is large and over the last one year, engineering industry has done well mainly due to rising domestic demand emanating from consumer credit at lower interest rates.
10.4 CAUSES OF THE SLOW GROWTH
One of the many reasons for slow growth of engineering sector is the absence of long term vision for development. The main emphasis was on low technology and low value added production confined to the agro based industry, and there was hardly any integrated and consistent approach towards any sector. The productive sectors were marred with irrational tariff structure. The regulatory mechanism was also missing. The large scale smuggling of electrical goods such as air-conditioners, motors, fans, and household appliances, automotive parts and steel products etc. has also hit the engineering industry rather badly.
The local consumption of steel which is one of the major indicators of industrial development did not rise due to high prices of steel. Moreover, for most of the engineering industries, effective protection was negative. [see World Bank, 1992, Kemal, Mahmood and Ahmed, 1993, National Tariff Commission, 1992]. The main reason for the negative protection was due to high duties on inputs whereas outputs were generally imported duty-free, under various concessionary tariff regimes or outright smuggled. Therefore local engineering industry
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has been deprived of a major business opportunity. 21 The main causes of poor performance of engineering sector may be summarized as follows:
• Absence of integrated approach for balanced growth of all economic sectors;
• Lack of consistent policies and political will in developing the local industry manifested in widespread smuggling of engineering goods;
• Ad-hoc approach in policy formulation and preferences for Turn-key imports of plant and machinery;
• Irrational and discriminatory tariff structure with relatively high import tariff on inputs and low/zero rates on output/finished goods along with cumbersome procedures for custom clearance of imported inputs;
• Priority to less value addition areas for investment and tariff support and lack of incentives to attract investment in high value added sectors;
• Lack of institutional support and incentives for acquisition and absorption of foreign technologies;
• Unfavorable cost structure due to factors such as: lack of economy of scale in production, high financing cost, high inventory carrying costs, low labor productivity, high utility costs, and high cost of local inputs particularly steel products;
• Lack of R&D and design, quality standards and engineering support resulting in the inadequate vending/sub-contracting facilities; and
• Lack of entrepreneurship and management skills.
10.5 DEVELOPMENT OF ENGINEERING SECTOR
Pakistan may draw upon the experience of Malaysia and Korea by developing strong technical manpower which can take the responsibility for absorbing and adopting technologies to produce products of high quality and improving the productivity levels. In 1995, government set up the Engineering Development Board (EDB) for providing policy direction and impetus for growth of the engineering sector. The mandate of the Board is to suggest policy initiative, provide leadership role, and act as a bridge between the government and the entrepreneurs/ investors in this sector to ensure achievement of set objectives. This step has made the beginning to create a policy environment which is more conducive for the survival and growth of local engineering industries, a lot still has to be done for achieving the potential growth rates. A result oriented policy package, fully backed, strengthened and implemented in its true spirit with an integrated approach focusing on overall development of all sectors of economy. Obviously it would only be possible if there is strong political commitment at the highest level for the development and growth of the engineering sector.
The most important step for the promotion of engineering sector in Pakistan is to allocate more resources to basic and technical education. The existing institutions are not fully equipped to provide the requisite skilled manpower for producing quality products. There are only 10 universities and colleges which offer 4 year degree courses to engineering students. Total
21 Just by banning the imp orts of turn key imports in power sector in 1992, the local industry benefited tremendously and that resulted into more indigenization and technology transfer. As a result of the decision, local manufacturers were awarded business for Muzaffargarh Unit 4, being set up by Chinese. Long term plans was also drawn for indigenization under consortium arrangement with reputable foreign technology partners to achieve a deletion level of about 55% over a period of 5-7 years.
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enrollment in these colleges and universities is less than 20,000. Another component of the engineering education is the polytechnic diploma which train associate engineers. There are total 58 polytechnic institutes in the country which provide 3 years diploma to students. The total enrolment in these institutes is 75,000. The vocational training institutes are also limited in number. The country has only 364 such institutions which provide one and two years certificate and diploma courses to students. The enrolment in these institutions is only 11500. However, most important is the fact that the graduates produced by these institutions are not in line with the demand.
For the development of engineering sector, enhanced private sector participation not only in production but also in the training of workers is crucial. The role of public sector would be confined to providing conducive and enabling environment through provision of appropriate physical as well as human resource infrastructure. Public sector would provide vision, policy direction and policy instruments; develop design engineering capabilities, databases and infrastructure; create testing labs and instruments; and start projects with the private sector partnership. The private sector would innovate and develop new products and processes.
10.6 STRATEGY FOR DEVELOPMENT
There are four components of the strategy relating to technology, human resource development, the internalization of Industry and Institutional and policy framework
10.6.1 Technology
There is a need to adopt such steps which encourage technology transfer to Pakistan in all sectors of economy. Moreover steps should also be taken to encourage industry for local technology production. Some steps which can help achieve these goals are
• Encouraging projects that result in transfer of technology; • A clear cut policy to promote technology up-gradation; expedite disbursement from
the Technology Development Fund; • Encourage assimilation and diffusion of technology by attaching all loan
applications to certain indigenous technology components, and • Facilitate adoption of Engineering Standards by strengthening the role of Pakistan
Standard & Quality Control Authority (PSQCA).
10.6.2 Human Resource Development
Non-availability of trained manpower is one of the main concerns in the development of the engineering industry of Pakistan. The main reason for this dearth is low allocation for education and training. The high quality training institutions with latest technology and trained teaching staff are therefore insufficient to cater the need of the industry. The deficiency can be overcome by
• Allocating at least 1 % of the GDP each year for the training of the manpower. Establishing high quality training centres equipped with latest technology and trained instructors;
• Collaboration between Engineering universities and engineering industry of the country to produce graduates in the disciplines having demand in the local market.
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These institution should be controlled by an autonomous Board comprising of members from the Engineering Industry;
• Sending engineers to Europe, Japan and other developed countries to be trained on the latest technologies;
• Import the latest technology for the training institutes where students can have the opportunity to operate these machines; and
• Inviting and engaging foreign consultants of different fields to train Pakistani workers and introduce process efficiencies by upgrading skills and technology.
• Student internship programs
10.6.3 Globalization of Industry
• Relocation of industries from industrialized countries to Pakistan by attracting large MNCs like GE, Alstom, Sulzer, Siemens, Mitsubishi, CMEC, Hitachi, Sony, Phillips, LG, etc to invest in Pakistan and make Pakistan member of the global supply chain;
• Making SAARC and ECO effective trade bloc; • Renegotiate existing agreements with foreign partners to permit exports (tractors,
cars, etc.) from Pakistan; • Encourage tripartite partnership amongst foreign investors; technology partners;
and local industrialists with assured work load; • Country’s image to be improved in terms of Law & Order situation, environment,
security, trained labour force, and cost of doing business; • Industrial representation in negotiation/resolution of important issues with all the
multilateral organizations; • Facilitate exports of capital goods; • Access to long term funds owing to long gestation period; and • Selective intervention to encourage and expand STAR performers.
10.6.4 Policy Framework
• Formulate a long term Industrial Policy by including the stakeholders in Policy formulation to avoid sudden business shocks;
• Reform taxation system to ensure effective implementation of R&D tax benefits, and timely tax refunds;
• Remove discrepancies/anomalies of preferential treatment for duty free imports of products, particularly for infra-structural projects;
• Implement intellectual property laws and an enforcement system; • Restructure/reorganize EDB for effective support to the Industry; • Further rationalization of tax and tariff regimes; • Encourage R &D organizations to manufacture Precision and Testing equipments. • Strengthen Pakistan Standard & Quality Control Authority; • Consumer Financing Scheme for market enhancement needs to be further extended
by Employers including Government/Public Sector through secured guarantees against gratuity/provident fund to the suppliers for leasing transport and domestic appliances to their employees; and
• Expedite enactment of effective repossession laws to further encourage leasing.
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10.7 GENERAL TARGET AND GROWTH STRATEGY
The engineering vision envisages a progressive increase in the share of industrial sector in GDP to 25% and the share of engineering goods to 30% of manufacturing by the year 2010. Similarly the medium term plan envisages an increase in the share of industrial sector to 35% by 2020 and then stabilizing it at that level in the subsequent period. To meet the target an investment of $ 10-12 billion would be required up to 2010, another $20-25billion up to 2020 and $30-40 billion by 2030. This will generate employment of about 2 million in 25 years. The exports of engineering sector is expected to rise to $2, $5 and $12 billion by 2010, 2020, and 2030 if low scenario of exports is assumed, but for the three period it may rise to $5 billion, $10 billion, and $18 billion if higher scenario is assumed respectively. However this can only be achieved through a growth led strategy of value added quality production.
The main strategic focus would be to bridge the widening technological gap with the developed countries through invigoration of engineering industry by providing conducive environment including the required technological, financial and physical infrastructures, and creating a seamless integration with emerging trends of global production systems. This will provide goods of international quality at competitive prices for domestic and international markets, support other sectors of the economy, and will facilitate in exploiting the niche in global translocation of industrial production.
The allocation of additional resources from the technology development fund, common facilities centers, technology centers and technical manpower development can take us to the path of rapid industrial development. With continued cooperation between CBR and Ministry of Industries and Production for further rationalization of taxes, tariffs and SROs can positively affect the overall output of the country. Given the political will, commitment and patronage, it is possible to achieve these modest targets with full participation of private sector stakeholders. 10.8 SPECIFIC TARGETS AND GOALS
10.8.1 Surgical Instruments, Medical Devices & Appliances Industry
The surgical instruments, medical devices and appliances industry is one of the important export industry in Pakistan but it produces low end products. The industry is still using old techniques resulting in low quality and low value added products. There is no diversification and existing products cater to the needs of limited markets in the western world. There is a need to transform the surgical instrument industry into a medical devices and appliances industry by developing and integrating multiple technologies.
10.8.1.1 Strategy § Value addition in disposable instruments category that constitutes majority of the
production. Developing Pakistan as a supplier of surgical instrument kits; § Diversify into value added instruments to increase penetration in the European
market; § Diversify into allied products e.g. plastic disposable products, hospital-textiles,
hospital furniture etc.; § Diversify into non-steel medical devices and electro-medical appliances; § Explore non-traditional markets i.e. Middle East, South East Asia, Africa, Latin
America;
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10.8.1.2 Target and Economic Impact
The strategy and action plan detailed in the appendix envisages an increase in investment of $200 million at present to $2000 million by 2030. It would help in sharp growth of output, employment and exports as detailed below.
Surgical Industry Existing 2010 2020 2030 Investments (US$ M) 200 590 1000 2000 GDP Contribution (M$) 62 256 500 800 Exports (M$) 124 200 400 1000 Employment 50,000 82,000 120,000 200,000
10.8.2 Electric Fan Industry
Electric fan is another export oriented industry. The main objective is to further penetrate in the global fan market with a diversified product base by making the domestic fan industry internationally competitive.
10.8.2.1 Strategy
To realize the objectives strategy inc ludes:
• Explore American, European, Middle Eastern, Latin American and African fan markets to achieve sustainable higher export growth;
• Ensure maximum utilization of existing installed capacity through technological up-gradation; and
• Aggressively diversify to broaden product range towards plastic and decorative fans;
10.8.2.2 Targets and Economic Impact
With a view to diversifying the fan products and meeting the domestic and foreign investment, annual requirements are modest. It is labour and skill intens ive industry with low capital-output ratios. The specific goals for the fan industry are as follows:
Electric Fan Industry Existing 2010 2020 2030 Investments (US$ M) 58 92 130 200 GDP Contribution (M$) 25 91 120 180 Exports (M$) 5.5 12 30 70 Employment 25,000 49,500 75,000 100,000
10.8.3 Ceramics Sector
With the growth of housing sector, demand for ceramics has increased sharply. Pakistan can export these products, provided they are competitive and more importantly have standardized quality products. Therefore, main goal is to introduce process efficiencies leading to technological up-gradation and enhancement of competitive advantage. Tiles industry at present has 83% share in the domestic market which can be easily enhanced to 95 percent but more importantly, exports may rise sharply. Similarly, sanitary wares industry can gradually improve its exports performance through improved product quality by adopting efficient production processes.
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10.8.3.1 Target and Economic Impact
Ceramic Industry Existing 2010 2020 2030 Investments (US$ M) 123 147 170 200 GDP Contribution (M$) 46 74 95 135 Exports (M$) 6 32 64 120 Employment 17,000 24,500 35,000 50,000
10.8.4 Machine Tools, Molds & Dies Industry
These are basic to the development of engineering sector and a cost competitive and dynamic machine tools, moulds and dyes would go a long way in making engineering sector competitive in the world market. This would only be possible by integrating new technologies and keeping pace with the technological advancements in line with the global manufacturing trends.
10.8.4.1 Major Issues • Since the sector has developed on the mistry culture concept, little care about
measurements and time and punctuality is being taken. It is therefore viewed as an auxiliary, dependent industry and not as an independent sector;
• Insufficient knowledge of tools and mold manufacturing techniques and material usages;
• Non availability of specialized steels; • Insufficient machining and manufacturing facilities and in majority of the cases
obsolete machines are being used; • Highly capital intensive when state of the art technology is involved but industrial
volumes are not available in Pakistan; • High running cost of inputs e.g. tools and lubricants and high cost of CAD and
CAM software; • Multiple machining techniques and production requirements are involved for
individual industrial sectors;
• Non-availability of trained personnel due to non-availability of state of the art training institutes.
10.8.4.2 Strategy • Establishment of National Molds and Dies Institutes; • Develop common facilities capable of providing services in areas like, surface
treatment/texturing, hardness, rapid prototyping, reengineering & scanning, etc; • Aggressively develop export markets for Molds, Dies, Jigs & fixtures including • Software, CAD, CAM & CAE data processing.
10.8.4.3 Targets and Economic Impact
Mold and Dies Industry Existing 2010 2020 2030 Investments (US$ M) 26 128 250 300 GDP Contribution (M$) 7 53 100 200 Exports (M$) 2 48 64 150 Employment 15,000 24,000 35,000 50,000
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10.8.5 Textile Machinery
To improve the quality of fabrics it is necessary to replace power looms with shuttle -less looms and then move towards more sophisticated air-jet technology. At present all the modern textile machinery is imported. With rising share in the world market, there would be sufficient demand for the textiles machinery.
10.8.6 Electrical Capital Goods
The stated goal is to strive towards indigenous development and productivity enhancement with the intent to attain the strategic objective of import substitution and export enhancement.
10.8.6.1 Strategy
• Local development & manufacturing of power generation equipment in collaboration with WAPDA;
• Standardization of small & Medium Sized thermal & Hydel turbines (upto 50 MW);
• Maximum utilization of domestic potential of electrical capital goods;
• Develop Middle Eastern market of electrical capital goods; and
• Increase penetration in African markets through government tied loans.
10.8.6.2 Targets and Economic Impact
Electrical Capital Goods Industry Existing 2010 2020 2030 Investments (US$ M) 166 217 200 300 GDP Contribution (M$) 70 177 300 500 Exports (M$) 7 150 250 450 Employment 11,000 27,000 40,000 60,000
10.8.7 Pakistan Automotive Industry
The automotive industry has the great potential for growth as the domestic market is expanding with the rise in the income level and auto financing facility extended by banks. Pakistan is among the countries having lowest density of cars (5.5) per 1000 persons. The density in other countries such as USA, Japan, UK, China and India is 760, 570, 520, 10, and 7 respectively. The world average car density is 120 which is higher than Pakistan.
The global annual exports of auto sector were $486 in year 1999. The share of Pakistan in this market in year 2002-03 was approximately $ 35 million which is negligible as compared to the size of the market. The auto sector imports are however in the tune of $ 491 million which consists of auto parts & vendor CKD (36%), tractors (11%), LCV’s (5%), motor cars (33%), vehicles for transport of goods (9%) and motorcycles (6%). 10.8.7.1 Major Issues of Auto-industry
There are a number of problems which the industry is currently facing.
• Product design & engineering capabilities constrained due to absence of economies of scale;
• Lack of laws and standards (MOT) with poor implementation of current laws;
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• Poor Tooling and die manufacturing facilities;
• Smuggling, under-invoicing and dumping of auto parts;
• Little R&D activities;
• Non availability of specified material and components;
• Lack of testing facilities in industry clusters; and
• The engineering and production facilities are sub-standard;
10.8.7.2 Policy & Strategic Direction
• To increase competitiveness, maximum commonization of local parts production between all automotive manufacturers be encouraged;
• Smuggling and unethical practices to be controlled / reduced;
• Availability of fund on easy term be made available;
• Government to provide requisite infrastructure, effective implementation of rules and regulations to support local industry such as Motor Vehicle Act, Anti Dumping Laws etc.;
• Technological up-gradation;
• Expand regional and global markets, through competitiveness, linkages and simple exports systems. Pakistan may become part of supply chain to ASEAN manufacturers and invite selected parts manufacturers;
• Emission and Quality Standards to be developed and implemented urgently;
• Provide incentive to OEMs for export of parts themselves by awarding twice the localization points of the parts exported;
• EPB should establish exports points in Lahore & Karachi, where assistance be available to potential exporters by way of information & advise on incentives, modalities & procedures, SROs, markets, banking, insurance, clearance & handling procedures and offices of such companies be sited;
• Participation of Pakistani companies in fairs at nominal cost;
• To promote exports, marketing consultants should be hired and placed in foreign missions;
• The procedures / documentation be simplified for exports;
• Up gradation of product testing labs and material testing labs along with Technical Training centers;
• The training centers should engage engineers for technical consulting services to the industry;
• Common Facilities for expensive processes like heat treatment, disc manufacturing at these centers; and
• Internship scheme for Agricultural Engineers to work with farm machinery manufacturers.
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10.8.7.3 Pakistan Cars / LCVs Industry
According to the industry sources the installed capacity of cars and LCVs increased from 96, 000 in 1996-97 to 121,000 in 2000-01 but utilization declined from 44% to 39%. Since 2000-01, there has been a rising trend in the capacity utilization and the industry at present is operating at full capacity. The outlook of the industry is positive and demand for cars may surpass 500,000 in the next 10 years. Consequently the investment is expected to rise in the sector.
10.8.7.4 Targets and Economic Impact
Cars/ LCV Industry Existing 2010 2020 2030 Production 130,000 300,000 500,000 800,000 Investments (US$ M) 500 1000 2500 5000 GDP Contribution (M$) 1320 3000 5000 8000 Exports (No of Cars) 0 10,000 20,000 50,000 Employment 200,000 300,000 400,000 500,000
10.8.7.5 Targets for Trucks and Buses Industry
Truck and Bus Industry Existing 2010 2020 2030 Production 4500 7000 20,000 35,000 Investments (US$ M) 70 120 250 500 GDP Contribution (M$) 150 300 500 800 Exports (No of Cars) 0 50 100 500 Employment 8500 10,000 20,000 30,000 Localization (%) 42 70 85 100
10.8.7.6 Pakistan-Motorcycles Industry
The Motorcycle industry of Pakistan is growing steadily. There are more than two million motorcycles in the country and industry produced around 300,000 motorcycles last year and in the current year, production may rise to more than 400,000. The motorcycle density per 1000 persons in Pakistan is 15 which is quite low as compared to the other countries. This shows the potential of this industry for growth. The industry is linked with the vendor industry which are supplying the parts worth Rs 4 billion annually. The plan is to increase the localization from 83% to 90% in 2010 and 90+ in 2020. The Industry is spending only 0.5% resources on R&D which is negligible as compared to the size of the industry and its future potential.
10.8.7.7 Targets and Economic Impact
Motorcycle Industry Existing 2010 2020 2030 Production 300,000 500,000 1000,000 1500,000 Investments (US$ M) 500 1000 2500 5000 GDP Contribution (M$) 200 400 1000 2000 Exports (No ) 5000 50,000 100,000 300,000 Exports (M $ ) 3 30 100 500 Employment 100,000 150,000 250,000 400,000
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10.8.7.8 Tractor and Tractor Parts
Pakistan being an agricultural country has big market for tractors. Tractor industry of Pakistan consists of 4 manufacturers, and another is expected to be added during the current years. The total capacity of the industry is 45,000 tractors per year but only 78 % of the capacity is utilized. The tractor density is low (one per 98 hectors) in Pakistan compared to India (one per 83 hectors). It is believed that one tractor ((50 hp) is required for 30-35 ha of land for optimum farm performance.22 Pakistan imported about $ 81.4 million worth of tractors and tractor parts in 2002-03; 56% on input of tractors in CKD condition and 34% on parts of the tractors. The plan is increase the localization from 82% to 90% in 2010, and 90-100% in 2020.
10.8.7.9 Targets and Economic Impact
Tractor Industry Existing 2010 2020 2030 Production 30,000 45,000 75,000 100,000 Investments (US$ M) 500 1000 2500 5000 GDP Contribution (M$) 200 400 1000 2000 Exports (M $ ) 0 15 30 50 Employment 50,000 100,000 120,000 150,000
10.8.7.10 Auto Parts Industry
The auto parts industry is $ 125 billion market dominated by the industrialized countries like USA, Germany and Japan. The share of Pakistan in the total exports is only $ 25 million which is negligible. Pakistan’s auto parts consumption is huge but the local production is only 12% of total sales. The industry estimates total sales of Rs 36 billion of auto parts of which local industry share is only Rs 4.5 billion. The auto parts vendors are also showing steady growth and becoming the most dynamic sector in Pakistan’s manufacturing sector. The total number of units in 2000-01 was 850 with the capital investment of Rs 26.2 billion. The industry has generated 110,000 jobs, paid Rs 5 billion as levies, exported $ 25.03 million and saved foreign exchange of 23 billion. As the production of auto motives is increasing in Pakistan, the Auto parts vendor industry is also expanding and its share in the Pakistan’s economy is also increasing. The component produced in Pakistan ranges between 56-70 percent of total CKD kit. The target is to increase the localization further. Moreover the EPA standards are also to be introduced in future.
22 A power level of 50 hp is economically feasible for 50 ha of land.
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Annexure 10.1
Surgical Goods Industry Action Agency Time Cost Impact
Establishment of quality testing lab affiliated with international standard testing lab to meet the tough quality standards in EU and USA markets
MOI & P Short Term
Rs. 1000 million
Reduce the testing cost to the producer to compete internationally and increase market share
Give Pioneering Status to industry for 10 years
MOI / EPB
Long Term
-
Attract investment in the long run to increase production and employment.
Provide Matching grants from TDF to the private sector and Eng. Universities.
MOI&P/ HEC
Long Term
Rs. 4000 million
Increase R and D activities in the country necessary for long run sustainability
Establish Common Facility Centers in Sialkot and Gujranwala clusters
MOI&P/ Medium Trem
Rs. 2000 million
Facilitate industry in increasing the production.
Introduce specialization of surgical goods in engineering universities and Poly-techs.
MOE Short Term
Rs 1000 million
Provide skilled manpower for the industry.
Establish Surgical Goods Development Board to develop data base, plan strategy, conceive targets and adopt ways to achieve them.
EPB Long Term
Rs.1000 million
Help industry with market information, analysis, and promotional methods.
Establish Exports Testing and Monitoring Lab to certify companies for exports and restricting non-professional firms who export low-quality goods.
MOI / EPB
Medium Term
Rs. 1000 million
Will improve the image in the international market and boost exports.
Arrange trade fairs, exhibitions and send delegations in non-traditional markets with the help of commercial councilors of Pak Embassies.
MOFA/EPB Long term
Rs.100 million per year
Increase exports.
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Fan Industry Action Agency Time Cost Impact
Development of Plastics components, Decorative fans, Efficient electric motors, Moulds and dies, Calibrations and designing of gauges, Painting, Packing with the help of Japanese industry.
MOI&P/ HEC
Medium term
Rs.1000 million
Will help industry to diversify into different products and increase the access and share in the Global Market
Establishment of testing Labs in Gujrat/ Lahore for the certification of UL, SASO, and CE
MOC/ EPB
Medium term
Rs.1000 million
Will save the industry transportation and other costs.
Training institutes for Plastic technologies, Moulds and Die making, Painting, printing and surface finishing, Sheet metal stamping, motor winding and Heat treatment.
MOI&P/ HEC
Medium term
Rs.5000 million
Will develop the indigenous base for the industry and Reduction in the cost of production.
International Experts be invited to train local experts on new mix of material used internationally.
MOST/ HEC
Short term
Rs.1000 million
Will help industry to compete in the international market.
Ceramic Industry Action Agency Time Cost Impact
Establish the Departments for designing of Tiles, Tableware and other ceramic products in different universities of the country.
HEC Medium term
Rs.1000 million
New and local designs will be developed and industry will diversify in products.
Development of Kilns which can work on different energy sources.
MOST/ PCSIR
Medium term
Rs.1500 million
Will help industry to keep working during peak winter months.
Establish a Research Institute to Develop or improve the Technology of the Kilns to be more fuel efficient to Save energy to make Production more cost effective
MOI&P/ HEC
Medium term
Rs.5000 million
Reduce cost of production and make industry more competitive.
Strengthen the existing ceramic institutes to revive training and education- PSIC/TEVTA (Gujarat, Multan and Lahore)
MOI&P/ HEC
Short term
Rs.1000 million
Trained LF will help Industry to achieve quality and quantity targets.
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Machine Tools, Molds and Dies Industry Action Agency Time Cost Impact
Inclusion of Machine Tool, molds/dies as specialization subject at post graduate level in Engineering Universities
HEC Medium term
Rs.1000 million
Quality of the molds and dies will increase with educated LF.
CAD/CAM software availability and trainings. We need to encourage this subject at Post graduate and graduate levels.
HEC Medium term
Rs.1000 million
Precision in the making of the molds and Dies will help in exports. Potentially Good career for workers.
National Machine Tool, Die & Mold Institute at Lahore. Machines having latest technologies be Imported for training and stripped and re-assembled to elaborate the function of each part to students.
HEC Long term
Rs.6000 million
Indigenous base for the industry. Will help in producing trained & skilled manpower.
JV for latest technologies in the Tool, molds and dies areas.
BOI/ MOI&P
Long term
Rs.1000 million
Industry Will be able to increase its share in the international market.
Textile Industry Action Agency Time Cost Impact
Development of multi-nozzle air-jet weaving machines.
Textile Machinery Institute
Medium term
Rs.1000 million
Quality of the fabric will improve with low cost.
Technology up-gradation with foreign collaboration.
BOI Long term
Rs.4000 million
Important for international competition.
Textile machinery manufacturing
MOI&P Medium term
Rs.1600 million
Reduce the cost to the local manufacturers
R and D for process improvement.
HEC Medium term
Rs.1000 million
Industry Will be able to increase its share in the international market.
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Electrical Capital Goods Industry Action Agency Time Cost Impact
Development of Turbo-generators.
Heavy Electrical Complex
Medium term
Rs.1000 million
WAPDA will save millions of dollars if produced locally
Technology up-gradation of the existing facilities for 125/32 generators through JV.
MOW&PWAPDA
Long term
Rs.1000 million
Save cost of production and energy wastage.
Manufacturing of Traction motors
MOR Medium term
Rs.1000 million
Rail engines will be used on electricity.
Generator transformers WAPDA/HEC
Long term
Rs.1000 million
Wapda will benefit. Will develop vendor industry
Testing lab facilities MOST Short term
Rs.1000 million
Will help industry to lower cost
Establishment of Design facility
HEC Medium term
Rs.1000 million
Help industry to compete internationally
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Annexure 10.2
PSDP Financial Allocation for Engineering (Rs. in Million)
Period Total S&T HRD/ Skill
2005-06 4663 2792 1871
2006-07 5822 3003 2819
2007-08 7544 3283 4261
2008-09 9960 3546 6414
2009-10 14166 3829 10336
Total 42155 16453 25702
2010-11 17222 4136 13087
2011-12 18552 4467 14086
2012-13 19985 4824 15161
2013-14 21537 5210 16327
2014-15 23243 5653 17590
Total 100540 24289 76250
2015-16 25208 6133 19075
2016-17 26879 6535 20344
2017-18 29488 7220 22268
2018-19 31880 7834 24046
2019-20 34138 8500 25638 Total 147593 36222 111371
Note: The figures for 2005-06 to 2009-10 may not exactly be equal to the total cost of the projects because of throw forward.
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CHAPTER 11
ELECTRONICS23
Musleh ud Din
The Electronics industry is one of the world’s fastest growing industries. It is a key enabler of growth and innovation, underpinning many important industries including Automotive, Information and Communication Technologies (ICT), Consumer Appliances, Defense, Biomedical Appliances and other scientific equipment and devices. Despite its huge growth potential, Pakistan has significantly lagged behind in the development of its electronics industry. This chapter examines the state of electronics industry in Pakistan, sets out a development strategy for the electronics sector, and underscores measures to realize the development goals.
The electronics activity in Pakistan mostly consists of repair and assembly of electronics equipment. Electronics manufacturing and design activities are largely non-existent, not least because of lack of core competencies in electronics, including highly qualified manpower and R&D capabilities. Electronics is a highly innovative field where new developments are taking place at a very fast pace. In this scenario, countries like Pakistan that have yet to make a mark in the field of electronics have to go a long way before an electronics industry that is capable of attaining international competitiveness can be developed. With this background, the objectives of a development strategy for the electronics sector are to: build on the existing capabilities in electronics; attract FDI in electronics sector to facilitate the transfer of technology; strengthen the capability in assembly and testing of electronic components; develop and enhance value added in the industry by moving into activities such as research and design; and support the development of indigenous supply chain.
For the electronics sector to emerge as one of the key drivers of growth in Pakistan, a coherent action plan is needed whose key elements include: creation of a business-friendly environment that is conducive for both domestic and foreign investment in the electronics sector; human resource development especially in the emerging areas of Digital Signal Processing (DSP), Optics, Digital Communications (DC), and Microelectronics; development of indigenous R&D capabilities; establishment of VLSI design and training centers; and development of specialized technology parks with quality infrastructure to support the concentration of high-tech industries.
11.1 INTRODUCTION
The Electronics industry is one of the world’s fastest growing industries. It is a key enabler of growth and innovation, underpinning many important industries including Automotive, Information and Communication Technologies (ICT), Consumer Appliances, Defense, Biomedical Appliances and other scientific equipment and devices. While USA and Japan remain the leaders in cutting-edge technologies, many Asian economies have developed their strengths in the electronics sector, which has been a major driver of growth in these economies. Despite its huge growth potential, Pakistan has significantly lagged behind in the development of its electronics industry. It is, therefore, imperative that a coherent strategy is put in place to develop its electronics sector with a view to increasing the country’s growth potential as well as to achieving self-sufficiency by reducing dependence on foreign sources of materials, components and equipment. 23 Thanks are due to Dr. Shaukat Hamid Khan for providing valuable input for this chapter.
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11.2 THE GLOBAL SCENARIO
Of all industry sectors, the electronics sector is one of the most highly and increasingly globalized. Trade in electronics goods has grown at almost double the rate of trade in total goods, with exports of electronics equipment in a few OECD countries equivalent to well over 5 percent of GDP. The global market volume of electronics stood at Euro 1.14 trillion in 2002, and is expected to increase to Euro 1.54 trillion in 2007. 24
The electronics industry is undergoing rapid transformation, as the process and component technologies are rapidly being developed and globalized. The US semiconductor producers like Intel, Texas Instruments, and Motorala have transferred significant R&D capabilities to countries in Southeast Asia. Leading US contract manufacturers have major production facilities in Singapore and Malaysia. Most major Japanese firms have established production operations throughout Asia. In addition to transfer of technologies into Southeast Asia by leading US and Japanese firms, domestic companies in Korea, Taiwan, Hong Kong, China, Singapore, and Malaysia all are fully exploiting advanced manufacturing technologies. The rapid acquisition of advanced production processes by the Asian economies has driven the US and Japanese firms to continue to pursue new areas in which they can assert their technological leadership.
As the technological capabilities of the Southeast Asian economies have increased, so have their labor costs. Consequently, the labor intensive operations of electronics manufacturing are being shifted to low-wage economies like China, Indonesia, Thailand, and Philippines. 11.2.1 Global Manufacturing Strategies
Manufacturing strategies depend on both products and process technologies including materials, components, design, equipment, process type, operator skills, and economies of scale. Strategies also depend on the type of manufacturer: contract manufacturer (CM), original design manufacturer (ODM), and original equipment manufacturer (OEM). All three types exist in various countries and are in a constant state of transformation. 11.2.1.1Contract Manufacturers (CMs)
Contract manufacturers produce proprietary products for OEM customers. Many contract manufacturers began as suppliers of standard parts and components. By adding assembly equipment and test capabilities, these vendors can produce more advanced components, like motherboards, or completed products to meet OEM customers’ specifications. As contract manufacturers increase their design capabilities, they seek to add additional value to their customer’s products. Design for PCB assembly is a major step in developing overall product design capability. Japanese and U.S. firms are using experienced high-volume, low-cost contract manufacturers to redesign existing products for cost reduction. PCB design and decisions to outsource plastic and metal parts and other electronic components are being given to contract manufacturers. U.S. and Japanese firms still reserve the right to evaluate the end products and processes for quality and reliability. ISO 9000 certification of contract manufacturers helps to ensure consistency of results. 11.2.1.2Evolution from Contract Manufacturing to Original Design Manufacturers (ODMs)
Growth of low-cost contract manufacturing in countries like China and the Philippines is forcing Korean, Taiwanese, and Singaporean vendors to increase their ability to add value 24 World Electronics Industry 2002-2007. Research Report No. DE 3120, December 2003. Available at www.electronics.ca/reports.
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through manufacturing of leading-edge products or advanced product design capabilities; that is, to assume the role of ODMs. Taiwan’s Inventec, an ODM producer, makes Apple’s Newton (PDA) and provides Compaq with its high-end LTE 5000 series notebook computers, both as ready-to-go products. Design capabilities have allowed ODMs to produce higher-value-added products. Design is dependent upon highly trained and experienced design engineers who are fluent in the latest technologies and able to integrate a full range of electronic components and technologies. 11.2.1.3 Original Equipment Manufacturers (OEMs)
Fully integrated firms that design, manufacture, and sell their own “brands” under registered trademarks are referred to as original equipment manufacturers (OEMs). While such companies are well known in the United States, Europe, and Japan, OEMs are now growing in the rest of Asia. For example, Vtech, the largest manufacturing firm based in Hong Kong, holds over 50% of the world’s market in electronic learning aids and toys. Lengend Holding’s QDI subsidiary holds a 15% share of the Chinese personal computer market. QDI creates its own designs, test procedures, and process layouts for both computer add-on cards and motherboards. Acer, the largest and most well-known OEM producer of desktop and notebook computers in Taiwan, ranks eighth in the U.S. PC market. Samsung is the leading supplier of personal computers in Korea. Today, the vast infrastructure of Asian component and equipment makers has led to an increased number of new OEM companies throughout Asia.
Brand Names. Marketing and design skills are the primary domain of global firms whose brands are recognized throughout the world. Outsourcing to CM and ODM vendors still requires market research and channel management by global brand leaders. With growing costs of after-sales service, design for manufacture (DFM) requires tighter relationships between the OEM design teams and their vendors. The increasing success of ODM vendors reduces the need for tight customer-vendor communications and allows the brand leader to focus more attention on gaining market access and share. In fact many contract manufacturers in Hong Kong ship finished goods directly to their customers’ designated destinations.
Marketing and Sales. Global leaders command markets around the world with marketing channel control, brand reputation, and customer brand loyalty. Names like IBM, TI, and Compaq are well known. Only companies with the most advanced technologies, able to gain first mover advantages, are likely to break into established markets in the future. The value of recognized brands makes it difficult for new entry into established markets. However, Korea’s Samsung is developing globally recognized names, as are Acer in Taiwan, and Vtech in Hong Kong. Market leaders are driven by customer satisfaction and the continued development of market and related distribution channels. Market intelligence keeps them close to their customers and helps in forecasting product demand, planning production ramp-ups, and minimizing related stockouts. The majority of contract manufacturers and ODM suppliers do not have recognizable brand names or direct access to markets or end users. They only serve as product providers. However, as brand leaders increase their dependence on ODM suppliers, they risk creating future competitors. Acer for example, began as a contract manufacturer and now has a globally recognized brand name.
Customer Service. Brand reputation is based on the relative life and dependability of a firm’s products. Rapid response to customer problems is an important competitive requirement. Customer service centers are required for branded products like copiers, computers, and automobiles that need repairs, servicing, or upgrading. Most manufacturers provide warranties and product replacements through national service centers of the brand holder. Effective communication is required to correct the source of market failures. Companies like GVC in Taiwan get daily feedback from U.S.-based engineers who analyze product failures. This
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information is used to take corrective action. To prevent serious field failures, OEM and ODM firms attempt to identify potential problems with products before they get shipped into the field. As a result, quality assurance activities are central to firms’ long-term success. 11.2.1.4 Global Trends in Electronics
The world market is currently valued at about US$ 1500 billion, and seems to be entering into a period of mature and slow market growth at about 6.3% annually (reaching about US$ 1900 billion in 2006-7). In 2000, Europe, USA, and Japan (with the "dragons") accounted for over 90% of world electronics production and market25. However, there is a major geographical shift in production away from Europe, USA, Japan and the earlier Asian NICs. By 2007, their share of world production is expected to fall to about 60%. The markets of Europe, USA, and Japan will still be about 70% of the world total, and exports to these ‘big three’ will therefore be met from new re-located manufacturing centers in Asia. Much production has already shifted towards China.
Figure 1: World Electronics Market by Region Growing Sub-Sectors Within Electronics: The combined market share of consumer electronics, computers, telecommunications, energy and industry is predicted to be nearly constant at about 83% until 2007. Automotive electronics, will, see a significantly stronger growth rate (its content per car is expected to increase from US$ 2000 in 2002 to US$ 3000 in 2007, reaching a total market of about US$ 190 billion.
A major re-structuring is underway to increase reliability and cost reduction, as in many mature industries. Hence the development of CEM (contract electronic manufacturing), EMS (electronic manufacturing services) and ODM (original design manufacturers). These have led to re-localising production sites, thus rationalising both costs and logistics. A whole new global industry called Contract Manufacturing (CM) or Electronic Manufacturing Services (EMS) has evolved in the last 20 years. While we all recognise modern high-technology gadgets and symbols of modern urban living, such as the PALM Personal Digital Assistant (PDA) or the cell phone from the Nokia. These were most likely manufactured in China, and not by those who own the brands.
There are distinct advantages of CM/ EMS. It permits flexible production and asset deployment, and reduces time –to-market when product life cycles are short. It also permits quick ramp-up to higher volumes and sharing of components, thus reducing costs while allowing for leading edge manufacturing where it is most cost effective. Finally, for most entrepreneurs, it reduces significantly the need for capital and provides a buffer to demand fluctuations in the user industry.
25 World Electronics Industry, 2002 –2007; Research report No DE 3120, Dec 2003.
0100200300400500600700
2001-2 2002-3 2003-4 2004-5 2005-6 2006-7Year
US
$ (b
illio
n)
Europe N. America JapanChina Other Asia Pacifics Rest of the World
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The EMS industry has evolved from small- and medium-enterprise (SME) entrepreneurs, commonly referred to as contract manufacturers, to large service providers. In the 1980s, the CMs had limited scope / functions, such as board stuffing. Over the years, the digital revolution expanded and demands from the consumer, telecom, computer and network companies increased significantly. As a result, these contract manufacturers started receiving more and more projects and now offer end-to-end services. This activity was worth US$ 103 billion in 2000, US$ 186 billion in 2004 and is expected to rise to about US$ 500 billion by 2010. 11.3 ELECTRONICS AS THE ENGINE OF ECONOMIC GROWTH IN THE ENGINEERING SECTOR OF PAKISTAN
While the share of engineering goods in world merchandise trade is about 63%, Pakistan’s contribution to this is only 0.000008%. Within Pakistan’s exports, cotton and its derivatives had about 70% share 1n 2003-04, while engineering goods made up less than 1%, and do not even figure in the government statistics 26. This state of affairs cannot be sustained, as agriculture productivity is quickly reaching its limits in Pakistan unless it experiences a major new wave of industrialisation based upon technology. The next 5-year plan, therefore, rightly places emphasis on the engineering sector to provide technology driven growth.
There are several reasons why the electronics sector will prove to be an excellent vehicle for technology driven growth in Pakistan. Firstly, it fits perfectly the general industrial profile of enterprises in the 21st century, i.e. agility, flexibility, and innovation driven. Secondly, to create one man-job, it needs only about 10 % of the capital required for classical industries such as steel, fertilisers, or chemicals; it also demands far less electric power, water, or space. Its work environment is much cleaner. It has not only given new meaning to the concept of venture capital, and provides returns which are among the fastest in the economy. Finally, it suits our cultural preference for white-collar jobs, and is very gender affirmative, with large fractions of female employees worldwide.
Specifically, it provides very favourable statistics when we examine different industrial sectors in the engineering sector in Pakistan. Table 1 clearly brings out the higher GDP contribution per person employed or per US$ (million) invested in segments relating to consumer electronics and electrical machinery. It is not surprising that electronics and its manifestations (consumer goods, communications, computers etc) were the key sectors which contributed to the rise of the Asian Tigers.
From the point of view of potential export earnings also, it would be short-sighted to focus on any of the traditional industries in Pakistan, simply because the world demand for them is so small. The global markets for fans, surgical / electro-medical equipment, ceramics and pharmaceutical chemicals is US dollars 2.6 billion, 30 billion, 83 billion, & 600 billion respectively; none of them match the world market for electronics (US$ 1,500 bin 2004). Share of our traditional surgical goods is even smaller. The fan, surgical, and ceramic industries must no doubt be facilitated to become more competitive, but it would be illogical to expect them to be the engines of growth in Pakistan.
26 WTO Database 2003, and Statistics Division, Min of Econ Affairs, Pakistan
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Table 11.1: Contribution of the Engineering Sector in Pakistan’s Economy
11.4 THE STATE OF ELECTRONICS INDUSTRY IN PAKISTAN
The electronics industry in Pakistan dates back to the Seventies, when major companies including RGA, Philips, and ELMAC established their development centers for electronics in the country. The National Institute of Electronics (NIE) was established in the late seventies with a view to promoting electronics industry in Pakistan. Despite early attention to the electronics sector, the electronics industry failed to make significant progress. This has been attributed mainly to lack of vision, political instability, and absence of a coherent policy framework.
Pakistan had a relatively lively electronics industry as far back as the late 60s and early 70s. Its manufacturing sector supplied radios, tape recorders, TV sets, CRTs, and other audio equipment as well as passive components, semiconductors and ICs.
However, privatisation policies of the government, coupled with unfriendly fiscal and tariff policies virtually closed down this industry, at a time when the NICs in South East Asia were beginning this activity in their countries. The rest of course is history. Malaysia now has nearly 25% of its work force working in electronics sector directly or indirectly, and is the 3rd largest exporter of consumer / household appliances. China is the 3rd largest manufacturer of PCs and is the largest market for cell phones.
A slight revival took place in the Pakistani electronics sector in the 80s, and nearly 300,000 TV sets (about 50% of the annual demand) were produced annually in 1989. However, by 1995 this number had fallen to about 65,000, and the CRT plant closed down. This industry was virtually killed off between the smuggler and CBR. Even then, the industry was valued at a minimum US$ 1.0 billion and possibly as high as US$ 2.0 billion.27 11.5 ELECTRONICS INDUSTRY IN PAKISTAN: SWOT ANALYSIS28
For an assessment of the potential of the electronics industry in Pakistan, a SWOT analysis has been carried out:
27 ( Munir Commission Report on Electronics, 1996) 28 Adapted from the Report of the Electronics Committee.
Contribution to GDP Engineering Goods GDP Share in US$
Exports US$ m
Employment (x 1000)
Investments US$ m
Per 1000 jobs
Per US$m invested
TV Sets 140 0 8 33 17.5 4.2 Surgical Instruments 62 124 50 200 1.2 0.3 Electric Fans 25 6 25 58 1.0 0.4 Ceramics 46 6 17 123 2.7 0.4 Moulds & Dies 7 2 15 26 0.5 0.3 Electrical Machinery 70 7 11 166 6.3 0.4 Automotive Parts 300 27 100 725 3.0 0.4 Steel 221 0 40 1500 5.5 0.1
Total 771 170 266 2831 2.9 0.3 Total of Others 1229 101 334 1500 3.7 0.8
Grand Total 2000 271 600 4331 3.3 0.5
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a. Strengths
• Robust economy, with a GDP of about US$ 100 billion in 2004
• Explosive Growth: Consumer Demand & Spending Private Sector Credit : Rs 134 billion in 2004-5.
• Major investments and expansion of technical and vocational education
• Cheaper components from China have helped develop EOS ( economies of scale) in Pakistan
• Tariff reforms have encouraged value addition/build up from components
b. Weaknesses
• Lack of core competencies in electronics, including highly qualified manpower and R&D capabilities.
• Lack of domestic supply chain for electronics manufacturing. • The existing industry is fragmented and lacks critical mass. • Supply chain is the weakest link. It needs to be fast, local and of international
standard • Technical management is shaky. • University graduates lack exposure to industrial practices and processes. • Quality and quantity of skilled technicians is inadequate, especially for
electronics and telecoms.
c. Opportunities
• Domestic market of 1.2 million TV sets (0.9 million local), and about 0.2 million DVDs; 0.75 million PCs; 3 local brands, expected demand to exceed 2.0 million by 2010
• In view of a great potential for further growth in the telecommunication sector (the existing teledensity is just over 3%), there is enormous scope for indigenous development and manufacturing of switching equipment.
• There is a huge potential for further growth in internet (current internet connectivity is just over 1%). Consequently, there is scope for indigenous development/manufacturing of computers, modems and routers etc.
• Growing demand for broad-band Internet services, hence scope for indigenous production of XDSL modems.
• Ever increasing demand for consumer electronics and home appliances, hence huge scope for their indigenous production (not just assembling the CKD kits)
• Non-availability of sensitive machinery and equipment (especially of defense nature), hence enormous scope for indigenous design and development of these items.
• Huge scope for indigenous production of electronic components for supporting the present and future electronics and communications goods/equipment manufacturing industry.
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• Hardware Production: Tel. sets / Cell Phones (greater than 5 million each per year), Modems, DSL, Switching Eqpt, Interface between fibers and the electronics units.
• Key modules used in TVs/computers have reached critical numbers contributing to healthy vendor industry: o Fly back transformers o Power supplies o Wire harnesses, connectors, switches, chassis etc. o Bare PCBs (about 1.5 million sq. ft. required) o Magnetic material for transformers
d. Threats • Growing importance and competitiveness of low cost manufacturing countries
such as China and India. • The pace of international technological advancements is far outstripping the local
technology. • Long lead time to develop leading edge capabilities in electronics
11.6 STRATEGIC OBJECTIVES
Electronics is a highly innovative field where new developments are taking place at a very fast pace. In today’s globally competitive business environment, electronics firms are under relentless pressure to provide innovative products in shorter time cycles, at reduced costs, and with improved quality. The electronics industry is driven by demands for products that are smaller, lighter, cheaper, and better than the ones they replace. In this scenario, countries like Pakistan that have yet to make their mark in the field of electronics have to go a long way before an electronics industry that is capable of attaining international competitiveness can be developed. With this background, the objectives of a development strategy for the electronics sector are to:
i) Build on the existing capabilities in electronics.
ii) Attract FDI in electronics sector to facilitate the transfer of technology.
iii) Strengthen the capability in assembly and testing of electronic components.
iv) Develop and enhance value added in the industry by moving into activities such as research and design.
v) Support the development of indigenous supply chain.
vi) Raise the share of electronics in the output of the manufacturing sector from under 3% at present to 10% in 2010 and to 20% in 2020.
11.7 ACTION PLAN
In order to achieve the broader objective of developing and sustaining an electronics sector that has the potential to emerge as one of the key drivers of economic growth, a coherent action plan is needed that assigns a leading role to the private sector while emphasizing the role of the public sector as a facilitator.
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11.7.1 Fostering the Existing Industry
The first step is to foster the existing firms in the electronics sector through supportive public policies. The private sector often complains about the inconsistency of government policies regarding the electronics industry. While the government has taken steps to ensure policy consistency, the private sector remains skeptical. There is, therefore, a need to restore the confidence of the public sector in the continuity of public policies.
The electronics activities in the country are mostly assembly and repair oriented. A few manufacturers are making a narrow range of electronics gadgetry such as security systems, pay-phones, electronic sign-boards, stabilizers, uninterruptible power supplies, inverters, radio and cassette-players, and dish receivers etc. The government can encourage these businesses by removing the customs duty on the import of electronics components. There is no dual use of these components and their cheap import will enable the industry to increase its scale of operations.
Large scale smuggling of electronics products has hindered the growth of domestic electronics industry. Urgent steps are needed to curb this practice in order to provide a level playing field to domestic producers. 11.7.2 Attracting Foreign Direct Investment
The global electronics production is controlled by multinationals that possess the necessary product and process technologies. Their innovative capabilities allow them to develop new electronics products at a very fast pace, so that older product lines are becoming obsolete faster than ever before. The Southeast Asian economies developed their electronics industries first by attracting foreign direct investment in low cost assembly operations and then by developing their design and manufacturing capabilities through the transfer of technology. If Pakistan is to develop its electronics industry, it must attract foreign direct investment in the electronics sector. The government has already announced lucrative incentives for foreign investors. However, the response of foreign investors remains lukewarm not least because of the concerns about business climate and security. It is, therefore, essential to create a business-friendly environment that is conducive for both domestic and foreign investment in the electronics sector.
In order to attract FDI, we must improve Intellectual Property Rights (IPR) and dispute settlement mechanism. The impact of these can be seen from the fact that China was able to increase its FDI manifold through improvement in IPR and establishment of commercial courts.29 11.7.3 Human Resource Development
Electronics is a knowledge intensive industry. The Southeast Asian economies supported their electronics industries through massive investment in human resource development. In Pakistan, there is an acute shortage of electronics graduate engineers and technicians especially in emerging technologies. There are only a small number of qualified professionals in the emerging areas of Digital Signal Processing (DSP), Optics, Digital Communications (DC), Microelectronics, and Microwave. Also, the quality of the available manpower leaves much to be desired. To make the situation worse, the production of graduate engineers and technicians is not demand driven, with the result that most employers find that fresh recruits require a long time before they become productive. To address these problems, the following actions are recommended:
29 Total FDI in China was only US$3.11 billion during the period 1980-1999. However, in 2000-2004, China attracted FDI amounting to US $68 billion in microelectronics alone owing to better intellectual property rights.
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i) Electronics education should be started at the secondary level. Electronics and
computers should be introduced as an integral subject, together with appropriate teaching kits for lab work.
ii) Facilitate and enhance interaction between educational institutions and industry. The report by the Committee on Electronics highlights various modes of collaboration between industry and academia. These include: unrestricted research grants; student support through independent contracts; consulting tasks; co-operative projects with public funding; industry sponsored graduate fellowships; part-time degree programs; student internships; and short-courses and workshops.
iii) Encourage educational institutions to place stronger emphasis on entrepreneurship, commercialization, and marketing studies in disciplines that lead to electronic related careers.
iv) Grant autonomy to Engineering Universities and Colleges to upgrade their syllabi in line with industry dynamics. Special focus should be placed on upgrading the course content in communications, computers and networking, industrial controls, semiconductor technology, circuit design and simulation.
v) Rather than having separate engineering universities and colleges, universities should be encouraged to set up these departments on their campuses. This will promote the interaction of engineering students with basic sciences including mathematics and physics etc.
vi) Support the educational institutions through special grants to initiate and/or strengthen their programs in the advanced areas of electronics such as microelectronics, optics, digital signal processing, and digital communications.
11.7.4 Strengthening and Developing R&D Capabilities
The objective of moving into proprietary product development can not be achieved without developing indigenous R&D capabilities. However, R&D activities require both funds and professional expertise. The public sector R&D institutions have not been able to make any significant contribution, despite decades of their existence. This has been attributed to a number of factors including: difficulty to retain highly qualified professionals owing to low pay-package; lengthy and cumbersome procedures for the approval of research projects; lack of leadership and especially teamwork; and lack of collaboration among various government organizations.
In the past, the approach has been to change the top management of these institutes, without addressing their fundamental problems. What is needed is a complete restructuring of these institutes with a view to making them self-supporting in the next 4-5 years. For a start, these institutions should be equipped with the state-of-the-art facilities which may be shared with other public/private organizations on payment. This mechanism would not only generate revenue but also promote public private partnerships combining the costly equipment and software available with the public sector with the professional expertise of the private sector.
Similarly, the public sector organizations should focus more on applied research and design activity rather than pure R&D projects. To a limited extent, applied research and design activity is currently going on in the private sector. In order to encourage such applied R&D activities in both public and private sectors, the government may start a matching grants scheme.
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11.7.4.1 Strategies for Strengthening R&D Activities30
R&D activities required for the development of our indigenous electronics industry could be strengthened by adopting the following short, medium and long-term strategies.
Short-term Strategies
i) Appreciation at the highest level of the need for indigenous R&D geared towards local manufacturing/production of electronic gadgets, machinery and equipment for meeting respective demands/requirements of the country.
ii) Encouraging and supporting joint ventures (JVs) between local and reputed foreign electronics manufacturers.
iii) Encouraging and facilitating public -private industrial partnerships in the field of electronics and telecommunications.
iv) Increasing coordination/collaboration amongst the academia, private sector industry and defense/public sector industry.
v) Establishing vocational training institutes for newly graduating engineers, to feed the industry with engineers who can contribute straightaway.
vi) Providing financial incentives such as rebate in income tax and/or GST to local electronics manufacturers, to encourage them undertake R&D activities in areas relevant to their activit ies for improving the quality of their products and becoming more competitive.
vii) Allocating more funds for university-based R&D activities relevant to the design and development of electronic gadgets, machinery/equipment and software for telecommunications, textile and defense applications.
viii) Providing incentives in the form of attractive pay packages to researchers engaged in the R&D activities.
ix) Allowing research productivity allowance to all researchers engaged in government-approved R&D projects.
x) Allocating more funds to defense/public sector organizations undertaking R&D activities in the field of electronics and communications.
xi) Promoting quality-conscious culture at the national level.
xii) Removing/minimizing political influence/interference in the functioning of our universities and defense/public sector R&D organizations and giving them maximum autonomy.
xiii) Reviving ailing R&D institutes/organizations of the country.
Medium-term Strategies
i) Improving standard of education at the primary, secondary and higher secondary school levels, to have a solid foundation to build upon.
ii) Revision of syllabi/curricula of B.E/B.Sc. Electrical and Electronics Engineering being taught at our universities, to put more emphasis on courses in electronics and development of practical skills.
30 Excerpted from the Report of the Electronics Committee.
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iii) Provision of more resources/funds to engineering universities, to enable them improve the quality of their faculties, laboratories and R&D facilities.
iv) Provision of more resources/funds to public sector R&D organizations for improving their facilitie s.
v) Removing/minimizing political influence/interference in the running of universities and public sector R&D organizations.
vi) Enhanced coordination/collaboration between the academia and the industry through clustering of appropriate entities.
vii) Converting National Institute of Electronics (NIE) into an autonomous national Centre of Excellence in Electronics (CEE), to undertake R&D activities aimed at the development of enabling technologies for indigenous manufacturing/production of electronic gadgets/instruments/ systems for both civil and military applications.
viii) Converting Institute of Silicon Technology (IST) into an autonomous national Centre of Excellence in Electronic Manufacturing and Packaging (CEEMP), to undertake R&D activities geared towards indigenous manufacturing/ production of electronic gadgets/instruments/systems for both civil and military applications.
Long-term Strategies
i) Sustained additional funding of universities and defense/public sector organizations engaged in R&D activities in the field of electronics.
ii) Establishing autonomous Model Universities of Technology (MUTs), on the pattern of Indian Institutes of Technology (IITs), one each in the federal and provincial capitals.
iii) Mandatory practical training for engineers on the pattern of house job for medical graduates.
11.7.4.2 Encouraging firm-based R&D through Incentives
Successful electronics firms invest huge sums in their own research and development to maintain a competitive edge in a highly competitive global environment. In recent years, there has been an increasing trend towards the establishment of companies that are exclusively devoted to carrying out research and development work for their clients. To encourage the establishment of R&D companies, the government may provide a pioneer status to such companies with a tax exemption of 100 percent for 5 years. Furthermore, to encourage the existing electronics firms to carry out in-house research and development, they may be provided tax credit for expenditure incurred on R&D activities. 11.7.4.3 Establishing Technology Incubators
There are numerous opportunities to launch new and successful business ventures based on novel technologies. The objective of the technology incubators is to help identify such opportunities and to assist project teams in the transformation of research projects into new businesses. The government may establish technology incubators through university/government /private sector collaboration. These incubators will provide support to technology start-ups in terms of initial funding and facilities, business plan and strategy, and professional services.
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11.7.5 Promoting Specific Projects
11.7.5.1 Manufacturing of Printed Circuit Boards (PCB)
While some government and semi-government organizations have PCB manufacturing plants, only few offer their services to the private sector and that too at exorbitant rates. There are only a few PCB manufacturing plants running in the private sector but these have limited capabilities as these can only produce single and double-sided PCBs with limited track-width and spacing. In addition, there is hardly any facility for the automated stuffing and soldering of components on these boards.
The PCB plants become financially viable only at a large scale of production. Since the cost of PCB manufacturing/stuffing is an important component of the cost of the finished electronics equipment, low cost manufacturing of PCBs will promote electronics manufacturing activity. The private sector can be encouraged to install PCB manufacturing/stuffing plants through the following incentives.
a) Exemption of import duties on equipment and raw materials.
b) Low-interest loans for the procurement of machinery.
c) Tax holiday for at least 5 years. 11.7.5.2 VLSI Design/Training Center
The setting up of a silicon foundry at Air Weapons Complex (AWC) is expected to promote the field of microelectronics. However, this would be possible only with the establishment of a VLSI design/training center. This VLSI design center would provide the necessary equipment and tools to the public and private sectors for use on commercial basis. To develop the necessary manpower for the future, this centre would conduct training courses in collaboration with various public/private organizations having expertise in this area of electronics. This centre should be established with the aim to make it self-supportive in a period of not more than 5-years. Pakistan has the potential to become one of the centers for off-shore VLSI design services. A few companies in the private sector, having expertise in VLSI design, are already providing their services and are generating foreign exchange for Pakistan. 11.8 LONGER-TERM STRATEGIES
In a longer term perspective, it is pertinent to acquire and develop capabilities at various points of the value chain. To further this objective, efforts need to focus on moving into a higher technology plane as well as developing the supply chain. 11.8.1 Moving into a higher Technology Plane
Pakistan must strive to move into a higher technology plane for the long run viability of its electronics sector. The acquisition of the necessary core and emerging technologies and competencies are critical for product development activities.
• Encourage the formation of joint-venture technology partnerships with foreign companies to acquire core, strategic and emerging technologies.
• Develop skills in high value-added activities such as R&D, design, branding and marketing.
• Develop specialized technology parks with quality infrastructure to support the concentration of high-tech industries.
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11.8.2 Developing the Supply Chain
The following strategic directions need to be pursued.
• Initiate component and product development projects through public -private collaboration.
• Explore the means to build up the country’s capability in fabrication technology along with the requisite skills development.
• Develop capacities in designing and fabrication of electronic machinery and equipment. 11.9 PROJECTS OF NATIONAL IMPORTANCE
Some projects of national importance identified by the committee on electronics are listed below:
i) Design, development and manufacturing of XDSL Modems.
ii) Design, development and manufacturing of Digital Radio Communication Systems.
iii) Design, development and manufacturing of Software-based Secure Radio Systems.
iv) Design, development and manufacturing of Digital Switching Equipment.
v) Design and development of Paksat-IR, the national telecommunication satellite system.
vi) Design and development of EOSS, the national Earth observation satellite system.
vii) Establishment of Electronic Components Production Facilities.
viii) Establishment of a state of the art (0.25 micron to start with) IC ASIC design fabrication plant.
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BIBLIOGRAPHY Alam, Ghayur (1990), “The Indian Electronics Industry: Current Status, Perspectives and
Policy Options”. Technical Papers No.30. Australia’s Electronics Industry Action Agenda, Commonwealth of Australia 2003. Khan, Munir A. (1996)”Electronics and Computers”. Prime Minister’s High Power
Committee on S&T, Sub Committees Reports, [Manpower/Software/Defence etc.], Vol.5-8, Islamabad.
Report of the Peer Review Committee on Electronics, Pakistan Council for Science and
Technology Phase-II, Report 8, July 2001. TIFAC, (1996), “Electronics & Communication: Technology Vision 2020”.
TIFAC:V:08:VIII:ESDR, Department of Science and Technology, New Delhi, India.
World Electronics Industry 2002-2007. Research Report No. DE 3120, December 2003.
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Annexure 11.1 Suggested Projects in Electronics
Action Cost Time Agency Impact
Developing Human Resources Ø Upgrade syllabi in line with
the industry dynamics, especially in: communications; computers and networking; industrial controls; semiconductor technology; and circuit design and simulation.
Ø Improve R&D facilities at educational institutions.
Ø Strengthen/initiate degree programs in advanced areas of electronics - Microelectronics, Optics, Digital Signal Processing, and Digital Communications.
Ø Establish liaison centers at universities to facilitate interaction between educational institutions and industry.
Ø Establish vocational training institute for newly graduating electronics engineers.
Ø Introduce electronic manufacturing technologies at all six UETs.
Ø Increase the quality of technical skills, teachers at polytechnics
Ø Increase the intake of technicians
Rs.100 million
Rs. 800 million Rs. 1000 million
Rs. 100 million
Rs. 850 million Rs.300 million Rs.450 million Rs.350 million
Short-term
Short-term
Short-term
Short-term
Short-term Short-term Short-term
HEC, MOST, PCST
HEC, MOST
HEC, MOST
HEC, MOST
HEC, MOST HEC, MOST JICA
Provinces, Ind. Edu. MOST, Ind., EDB
Enhance knowledge base/ skills for electronics students; Increase efficiency and productivity
Save as well as earn foreign exchange from home grown technology.
Increase the much needed skills in advanced areas.
Improve efficiency of universities and will ensure availability of most desired work force in the industry.
Enhance the skills of the workers and thereby increase productivity of the industry and reduce industry losses incurred due to lack of practical exposure of the new engineers.
Strengthening the Public Sector R&D Organizations
Ø Acquire/improve R&D facilities related to the design and development of electronic gadgets, machinery/equipment and software for telecomms, textiles, and defense applications.
Rs. 600 million
Short-term
MOST, PCST
Save huge foreign exchange spent on the import of such expensive equipments and expertise.
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Create Four National Centers Ø Semiconductors & Micro-
electronics, Lahore Ø Lasers & Optronics, Islamabad
Ø RF & Microwaves, Risalpur
Ø Telecommunications, Karachi
Ø Convert NIE, NIST/PCRET
into a revamped/re-populated National Electronics Center (NEC)
Ø Convert Institute of Silicon
Technology (IST) into an autonomous national Center of Excellence in electronics manufacturing and packaging (CEEMP).
Rs. 1150 million Rs. 1050 million Rs. 640 million Rs l550 million Rs. 730 million Rs. 800 million
Short term Short term Short term Short term Short-term Short-term
HEC, M OST PAEC, HEC, MOST NUST, MOST, HEC PTCL, MOST, HEC MOST, PAEC, HEC, PEC MOST, PAEC, HEC, PEC
Provide a base for technology development in Electronics and an opportunity to nurture the abilities of qualified electronics students. This all will reduce expenditure on imported technology. Establishment of the centre will reduce the cost involved in such processes and increase efficiency; Greater competitiveness.
Establishing Technology Incubators Ø Technology incubators
through university/ government/ private sector collaboration
Rs. 500 million
Short term
MOST PCST HEC
Facilitate technology development and adoption in the industry, and will strengthen the industry capacity to increase its productivity and efficiency on sustained basis.
Establishing VLSI Design/Training Center Ø This center would provide the
necessary facilities to the public and private sectors for use on a commercial basis.
Ø To develop the necessary manpower for the future, it would conduct training courses in collaboration with other organizations having expertise in this area.
Ø It should be established with the aim to making it self-supportive within 5 years.
Rs. 730 million Rs. 280 million
Short term
MOST, HEC, PAEC, Eng. Council
Build the required skills in this field and will help in increasing the production of other industrial products, thereby increasing the employment opportunities as well as the contribution to GDP.
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Ø Produce 1000 design engineers, through special courses/training.
Ø Introduce these techniques &
tools at 6 UETs.
Rs. 1200 million
Short term Short term
MOST, PAEC, HEC, PEC HEC, MOST, PAEC
Establishing Technology Park Ø Develop specialized
technology parks with quality infrastructure to support the concentration of high-tech industries
Rs. 3 billion
Medium term
MOST, PCST
This will improve the standards of our electronics products to the extent that our products will be exported and the country will get huge foreign exchange earnings.
Supply Chain Encouragement Ø Zero Duty on RM,
components, Production Eqpt Ø Pilot plant for electrolytic
grade copper, 20 tons/day Ø Stringent Testing &
Certification of Materials (x5 labs) (for specs, safety and reliability)
Ø
Nil Rs. 120 million Rs. 150 million
Short term Short term Short term
CBR, Commerce PAEC MOST, EPB, PCSIR
Strengthen the domestic supply chain.
Industrial Engineering & Automation Ø Introduce the techniques &
tools at 6 UETs & NFC Ø Introduce the techniques &
tools at 15 polytechnics in Pakistan
Ø Productivity training (200
engineers) abroad, then local training
Rs. 330 million Rs. 280 million Rs. 150 million
Short term Short term Short term
MOST, PAEC, HEC MOST, PAEC, HEC, PEC JICA, UNIDO
Promote electronic applications in the engineering sector.
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Annexure 11.2
PSDP Financial Allocation for Electronics (Rs. in Million)
Period Total S&T HRD/ Skill
2005-06 1670 1000 670
2006-07 2094 1080 1014
2007-08 2693 1172 1521
2008-09 3580 1274 2305
2009-10 5139 1389 3750
Total 15176 5916 9260
2010-11 6320 1518 4802
2011-12 6903 1662 5241
2012-13 7555 1824 5731
2013-14 8292 2006 6286
2014-15 9154 2226 6928
Total 38224 9236 28989
2015-16 10249 2494 7755
2016-17 11487 2793 8695
2017-18 12888 3156 9733
2018-19 14769 3629 11140
2019-20 16762 4174 12589 Total 66156 16245 49911
Note: The figures for 2005-06 to 2009-10 may not exactly be equal to the total cost of the projects because of throw forward.
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CHAPTER 12
ENERGY-POWER31
Rehana Siddiqui
Energy plays important role in economic growth and in improving the quality of life. The study examines the role of research and development in power sector to increase the supply of power and reduce losses. The study suggests building up new dams to increases hydel power, beneficiation of domestically available coal for thermal power generation at low cost and setting up of nuclear power plants. Development of alternative sources of energy e.g., building, wind energy farms and small hydel, solar energy can help to reduce power shortages at the local level. Similarly efforts like development, commercial production and promotion of usage of energy saving devices like energy reflectors, towers, and other devices can be very effective for energy conservation.
12.1 INTRODUCTION
Sustainable supply of energy is a prerequisite for economic growth. Increased use of better energy sources saves time, improves productivity, helps people in improving the quality of life and environment. For example, in the small scale industry, especially concentrated in rural areas, power provision can increase the length of working day and increase the productivity of the resources. Energy is also an important source of government revenue that can improve the fiscal deficit in the country and it can also result in increased availability of the resources for public investment in these public utilities. 0ver the 1992/93 to 2001/02 period, the share of private investment in power, gas and water increased from 0.52 percent to 3.3 percent and the share in total public investment increased from 28.12 percent to 30.27 percent.
In Pakistan, the energy sources are diverse, viz, power, natural gas, petroleum and petroleum products. Power in generated by using hydel, thermal and nuclear resources with different cost structure that has implications for the power tariff rates. The rising cost of exploration is increasing the cost of supplying the natural gas. The rising and uncertain pricing behavior of the petroleum products affects the cost of production, and also have important balance of payment implications.
The growth rates, reported in Table 12.1, show that growth of net supply and net consumption of energy varied significantly. On average the growth rate of net consumption remained slightly below the growth rate of energy supply indicating a rise in transmission and distribution losses for power.
31We are grateful to Mrs. S. T. K. Naim for her interest and valuable support for the study. Thanks to Brigadier Nasim, Dr Parvez Akhtar, Director General PCRET, Mr. Akhtar Ali, Chief Executive Best Power Solutions and Mr Zameer Awan for their useful suggestions and help.
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Table 12.1: Energy Situation in Pakistan
Energy Coefficient 1989-90 Growth Rate (1989-2001) 1991-92 2000-01
Output Growth Rate 2.08 2.42 1. Petroleum Products Net Supply 8065360 3.44 - - Transmission and Distribution Losses -1139 10.25 - - Net Consumption 8066499 3.29 4.15 -1.31 2. Natural Gas Net Supply 5137893 5.22 - - Transmission and Distribution Losses -417060 28.0 - - Net Consumption 4720833 4.96 1.72 3.24 3. Electricity Net Supply 2978866 5.24 - - Transmission and Distribution Losses -685870 6.82 - - Net Consumption 2342996 4.76 3.45 2.13 4. Total Energy Net Supply 17707764 4.09 - - Transmission and Distribution Losses -1051790 7.29 - - Net Consumption 16655974 3.79 3.58 1.96
Source: Energy Year Book (various issues).
12.2 ENERGY TRENDS IN PAKISTAN
The Sources of energy are: – Power – Natural Gas – Coal – Petroleum and Petroleum Products
The energy supply and consumption, both, are indicators of prosperity of a country. These are also indicators of emissions and pollution generated/averted. The supply of primary energy, during 1990s, increased from 28.469 million TOE in 1990-91 to 44.456 million TOE in 2000-01 and per capita availability increased from 0.253 TOE in 1990-91 to 0.311 TOE in 2000-01.
The energy coefficient, ratio of growth rate of energy use to output growth for various sources of energy varied significantly showing that, in Pakistan, intensity of energy use varied over time. The energy coefficient for power is quite high, i.e., 2.13 percent but may decline as the efficiency of fuel use increases either due to improvements in technology or due to reduction in wastage. The energy intensity coefficients reported in table 12.2, indicate that Pakistan should concentrate not only on the expansion of energy sources but also on improving the efficiency of resource use. The pricing behaviour, and improvements in technological and industrial efficiency can play an important role in improving the efficiency of this resource.
Table 12.2: Energy Intensity (1990-91/2001-02) Energy Intensity (incl. Hshlds) Energy Intensity (excl. Hshlds) Power 1.08 0.60 Natural Gas 1.31 1.24 Coal 0.20 0.20 Petroleum 1.22 1.41
Keeping in view the significance of energy, it is important to forecast future needs of energy. Following assumptions are made to forecast energy demand growth rate:
1) Energy intensity remains the same;
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2) The growth rate of the current supply is the base for future forecasts. If the growth rate of energy supply slows down the gap will be higher and vice versa; and
3) Current demand elasticity with respect to income, prices and size of the consumer groups remain constant.
The growth rates, reported in Table 12.3 show that significant gap will emerge even with modest growth rate of output, i.e., 5 percent. Keeping in view the importance, diversity and possibility of exploring new technology frontiers, we are concentrating on power sector as the major source of energy.
Table 12.3: Future Growth Rates of Energy Demand Energy Source GDP Growth
Rate 5 Percent GDP Growth
Rate 7 Percent GDP Growth
Rate 10 Percent Growth Rate of Energy Supply
(1997-2002) Power 5.4 7.56 10.80 4.1 Natural Gas 6.55 9.13 13.10 4.7 Coal 1.00 1.00 2.00 -0.8 Petroleum Products
6.1 8.54 12.20 2.2
12.3 POWER Table 12.1, mentioned earlier, shows that the growth rate of supply of power and of net
consumption slowed down after 1992/93. 32 Like other energy products, the price of power has also increased sharply during the 1990s. The share of different sectors, in power consumption, during 1990s, was as follows: 40.3 for households, 5.4 percent for commercial, 31.3 percent for industry, 14.8 percent for agriculture, 0.7 percent for street lights and 7.6 percent for other government. Table 12.3 shows that depending on growth rate of output the growth rate of demand for power can vary between 5.4 percent (low growth scenario) and 10.80 percent (high growth scenario). The objective is to fill the gap at the lowest cost as well as improving the quality of life in remote areas. For realizing these objectives, following strategies are proposed:
1) Expansion in the supply of power;
2) Improvements in the access to this basic service; and
3) Energy conservation.
12.4 EXPANSION IN POWER SUPPLY
Pakistan inherited only 50 MW power generating capacity in 1947. Until 1958, it increased to 119 MW showing a meagre growth in the power generating capacity. The number of customers was 300,000 at that time. In 1958, WAPDA was established as a water and power resources development and distribution body. WAPDA worked on Indus Basin Water Treaty, Mangla Dam, Tarbela Dam and a number of thermal power projects. However, it was unable to meet rapidly growing demand due to financial and political constraints. In 1985, under an agreement with the World Bank, a policy for encouraging private power producers and for attracting foreign direct investment in the power sector was announced. However, the details with the applicants from the internatxxional consortium and groups, were finalized after the mid 1990s. In the Energy Policy announced in 1994, incentives were given to independent power producers (IPPs) to set up thermal power units in Pakistan. After intensive negotiations, 13 projects with the capacity of 2700 MW were finalized. Among these 13 projects, 11 have started production. HUBCO with power generating capacity of 1292 MW started production in 1997. In
32 The reason could be increased use of captive power.
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2001/02, total power generating capacity increased to 6491 MW thermal and 5010.2 MW Hydel, of WAPDA & KESC and 5795 MW for the IPPs.
In terms of cost comparison hydel is the cheapest source of energy. WAPDA Vision 2025 indicates that Pakistan’s hydropower potential is about 40,000 MW. The vision identifies that by 2005/6 Pakistan’s power shortage will equal 500 MW that will require 650 MW generation capacity. For bridging the gap a number of projects are proposed. These will be undertaken either by WAPDA or Joint Venture with private sector. Similarly, for 2010 the energy gap is identified to be equal to 5000 MW which can be met by raising Mangla, and construction of Neelum-Jehlum and Kohala (Jehllum) and other dams.
WAPDA also launched power sector restructuring programme in the 1990s, with the support of World Bank, ADB and IMF. Under the programme, the WAPDA’s power unit is restructured into 12 distinct entities under the management of Pakistan Electric Power Company (PEPCO).33 Similarly NEPRA is formed to protect the interest of consumers. However, the recent increase in power prices have also raised issues about the effectiveness of NEPRA as a regulatory authority. In 1994/95, the power infrastructure like transmission lines and establishment of grid lines, was expanded by the loans provided by IBRD and government of UK.
In 1991/92, in the new energy policy private sector was encouraged to participate in power generation. Until early 1990s, the gap between supply and demand for power was significant. To meet the growing demand private sector was invited to contribute in power generation. Major power producer was HUB Power Company with the capacity of 1292 MW. Main fuel used by HUB is furnace oil. Private sector is encouraged to build power plants by giving fiscal incentives like tax holidays and duty free imports of electrical plants and machinery. Rising share of thermal power in total power supply, particularly private power producers, resulted in rising cost of power purchases by public utilities and consequently in higher prices.
Even though private power producer claim that high oil prices in Pakistan are responsible for high power tariff, energy cost varies between one-third and one-half of total prices. The guaranteed high 18 percent rate of return to IPPs has created financial problems for WAPDA and put a heavy burden on future generations. Nevertheless, the renegotiated tariff of 4.75 cents, with IPPs, and the conversion of oil fired thermal plants to gas fired plants has in some savings to the WAPDA and part of that has been transferred to consumers.
Regional power distribution companies like REPCO (in Rawalpindi) and MESCO (in Multan) and other electric suppliers were taken over by WAPDA in 1981, but in 1999, in order to improve financial, operational and management position of WAPDA, on long term basis, measures are taken to split WAPDA in to various independent power companies, i.e., eight distribution companies, three generating companies (GENCOS), and a National Transmission and Dispatch Company (NTDC). These entities are to be corporatized under the management of PEPCO.
In order to expand power supply, following action plan is suggested.
Option # 1: Expand the supply of hydel power
• The capital cost of this option is higher as compared to any other alternative.WAPDA has proposed a number of projects. The first option is Basha Dam/Kalabagh Dam. However this will increase the supply of energy in the long term. (see annexure 12.1).
33 In order to restructure WAPDA, PEPCO has to examine the following: Deregulation of power sector; promotion of IPPs;restructuring and to select corporate entities for privtisation.
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• Similarly construction of mini-hydel plants can increase the power supply in remote areas.
• Additional benefits include reduction in wastage of water
The building of mini-hydel will increase the availability of power in remote areas, however, there will be an element of seasonality in the supply and promote SME in the remote areas, e.g., Northern Areas, will flourish.
Currently PCRET is working on provision of alternative sources of energy. The institute has provided help in building mini-hydel plants in Northern Areas where it has helped to improve the quality of life and productivity of the cottage industry in the area. More resources are required to expand the scope of these activities. Option # 2: Expand the supply of thermal power
• The cost of generation is high. With the rising price of furnace oil it may not be possible to supply power at a lower cost. Since coal is an important input in the process, coal beneficiation may reduce the cost of using indigenous coal in the production and also reduce the environmental cost of coal use. [see annexure 12.1].
• Coal based thermal power generation through development of clean coal technologies and beneficiation techniques.
• Manufacturing and promoting the use of efficient boilers. • Since enormous amount of flyash are produced from thermal power plants. Cost effective
Flyash utilization techniques need to be developed. • Develop desulpherisation technologies to reduce environmental problems. • Availability of cooling water is critical for the production of thermal energy. Use of dry
type cooling towers and air cool condensers is required. • For hydel power generation, development of material that can be used in manufacturing
blade used in power generators which can stand the pressure water and sediments in the water.
• Improvements in the design and manufacture of turbines, particularly where heads are small and discharges large.
12.5 ALTERNATIVE SOURCES OF POWER SUPPLY
The availability of alternative sources of energy, viz., nuclear, wind, and solar, is critical for providing sustainable and affordable energy to the remote areas. Which option should be promoted depends critically on the cost of producing power using alternative method. Until the sources of energy are comparable in terms of cost, it is difficult to suggest which alternative to select. In addition, Wind energy is site-specific, availability of Micro-hydel power is seasonal, and Solar (photo-voltaic) is expensive.
Nuclear energy is another source of power supply. It is expensive but the cost of generation is low and declining. 34 In Pakistan KANUP at Karachi and CHASNUP at Chashma are generating nuclear powers. Currently, the expansion in this area requires technologies in all segments of nuclear fuel cycle such as mining/processing of uranium, conversion in to fuel bundles, production of heavy water and design and manufacture of reactors and others. For efficiency and environmental concerns reprocessing of spent fuel is needed. Furthermore, acquisition and development of improved technologies for repair, maintenance, safety of plants and waste management is also required.The cost disadvantage of the nuclear power, as compared
34 Currently, the cost of generation on nuclear power has declined from 2.12 cents per unit to 1.91 cents per unit.
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to hydel or thermal, is disappearing. The recent data shows the declining trend in the cost (approximately equal to 1.91 cents per unit). Currently, PAEC is in the process of building CHASNUP-II at Chashma. Since this source of energy is more reliable then the wind and mini-hydel, the estasblishment of nuclear power plants in other areas of Pakistan is recommended.
The estimated annulized cost of electricity generation is Rs. 3.42/Kwh for the 30 years life of the Chashma Nuclear Power Plant-2 (at 8 percent discount rate). The proposed tariff schedule is as follows: Rs. 3.90/Kwh in 2011-12; Rs. 3.60/Kwh in 2012-2023-04 and Rs. 2.92/Kwh in 2024 to 2040/41.
The role of science and technology is critical in achieving the objective of increasing the access to energy. Following actions can be taken in this regard.
Option # 3: Encourage the alternative sources of energy. The sources are:
a) Micro hydel units
b) Wind Energy
c) Solar Energy
12.5.1 Micro hydel units (short term)
• These units can be established in remote areas where the reasonable water fall is
available, e.g., Northern Area.
• The cost of establishing a unit of capcity 20-25 KW is:
a. Capital Cost: Rs. 1.045-1.27 million
b. Operational Cost: Rs. 0.025-0.072 million
c. Generational Cost : Rs. 1/- per KW
• PCRET has established a number of units in Northern Areas. However, it is at a small scale. There is a scope for expansion.
• There is no distribution cost and it can serve the needs of a small village. • This expansion will have a significant impact on the life of local population and
it will also boost the local cottage industry. 12.5.2 Wind (medium term)
Wind energy can be beneficial depending on the location. The wind speed affects the performance of the devices to produce power. For this purpose it is important to work on the improvements of design and manufacture of windmills. Technology development in the transmission mechanism and design of rotor system should be emphasized.
• The units can be established to supply power in specific areas where the supply of power through grid is expensive and the wind speed meets the standard. A project funded by the Ministry of Science and Technology has recently identified sime location for setting up Wind Energy Farms.
• The capital cost of establishing a system with a capacity of 500 W is Rs 0.075 million. There is no cost of generation and distribution.
• However, the reliability of this source of energy depends on the speed of wind.
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12.5.3 Solar Energy (long term)
Solar energy can be an important source of energy in Pakistan. The option of solar energy can be exploited in two ways: thermal and photovoltaic. For solar-thermal power generation the concentrating collectors are used to focus sunlight to heat a working fluid to high temperature. The solar photovoltaic converts solar energy to power directly. Development of photovoltaic cells is critical for the development of this source of energy. [see annexure 12.1].
• The solar energy can be produced either using thermal units or the photovoltaic cells. The capital cost of production solar-photovoltaic of 1 KW is Rs. 0.5 million and annual operational cost is Rs. 0.015 million.
• Currently Pakistan is not producing photovoltaic cells and it is costly to acquire it in the short run. It can be done in the long run.
12.6 ENERGY CONSERVATION
The power losses are another critical area of concern. In the power sector the transmission and distribution losses were more than 20 percent in 1990s with a rising trend. The transmission and distribution power losses, which were less than 22 percent of total supply until 1996/97, increased to around 27.2 percent in 2001/02. The auxiliary consumption increased from 2357 Gwh in 1996/97 to 2929 Gwh in 2001/02. This raises concerns regarding the effectiveness of the efforts in reducing power system losses.
Improvements in transmission and distribution can lead to significant reduction in the cost and improve the efficiency of the system. From the supply side this needs improvements in infrastructure and governance. For the demand side technologies for energy conservation are required. For this purpose it is important to raise awareness about the options available and ensure accessibility of the options to the users.
Option # 4: Energy Conservation
The organization “Best Practices” is working on promotion of energy saving devices. It is claimed that these devices can reduce the cost of energy be 50 percent. For example, Putting an “Energy Saving Reflector” can reduce the demand for flourscent tubes from 2 to 1. Assuming that a tube light works 8736 hours per annum and cost of power is Rs. 4.18/Kwh (B-3 tariff), the energy cost is Rs. 3350/-. The price of the reflector is Rs. 1600/- leading to saving of Rs. 1750/-. The cost of reflector can be recovered in 11-months. Currently these reflectors are not manufactured in Pakistan. There is a need to import technological know-how (can get it from China) and set up manufacturing units. [see table 8 in annex].
For improvements in transmission and distribution system, following issues can be explored by the R & D institutions in Pakistan:
1) Development of new range of towers, transformers, and reactors to be developed. Expertise in the area of design, engineering and operation of the system are required.
2) Developing proper micro-processor based compensation system to enhance carrying capacity of the transmission lines.
3) In order to minimize the loss in distribution development of efficient power consuming equipment is required.
4) Technology development towards production of reliable equipment with reduced maintenance operations. In India, it is recommended to use SF6 circuit breakers.
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12.7 CONCLUSIONS
Energy plays important role in economic growth and in improving the quality of life. The supply-demand analysis shows that even with modest economic growth, the current rate of change in supply will result in power shortages. This shortage will effect economic growth adversely. Therefore, it is important to enhance production by increasing the supply of power from traditional sources like hydel, thermal and nuclea. and from sources like building micro/mini hydel power units, solar and wind power. Energy conservation efforts are also important for improving the availability and efficiency of the power sector. The study examines the role of research and development in power sector to increase the supply of power and reduce losses. The study suggests building up new dams to increases hydel power, and beneficiation of domestically available coal for thermal power generation at low cost. Development of alternative sources of energy e.g., building small hydel plants, wind energy and solar energy can help to reduce power shortages at the local level. Similarly efforts like development, commercial production and promotion of usage of energy saving devices like energy reflectors, towers, and other devices can be very effective for energy conservation.
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BIBLIOGRAPHY Government of Pakistan, (various issues), Pakistan Economic Survey, Ministry of
Finance, Islamabad. Government of Pakistan, (various issues), Pakistan Energy Yearbook, Hydro Carbon
Development Institute of Pakistan, Islamabad. TIFAC (1996), “Electric Power: Technology Vision 2020”, Technology Information,
Forecasting and Assessment Council, Department of Science and Technology, New Delhi, (September).
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Annexure 12.1
PROJECTS PROPOSED
Table A12.1: Increase in Hydel Power
Actions Needed Agency Time Expected Cost Expected Benefits
Basha Dam (with the passage of time other dams can be built)
WAPDA 7-10 Years Financial Cost. Actions should be taken to reduce the environmental cost. Estimated project cost is USD 6000 million.
Availability of power and of irrigation water will increase the productivity in the industrial and agriculture sector.
Mini-Hydel Power Plants
WAPDA/ PCRET
5-years The cost of establishing a unit of capcity 20-25 KW is: a. Capital Cost: Rs. 1.045-1.27 million b. Operational Cost: Rs. 0.025- 0.072 million Generational Cost: Rs. 1/- per KW
Can increase the availability of power in the remote areas where small watre falls are available.
Table A12.2: Beneficiation of Coal Actions Needed Agency Time Expected Cost Expected Benefits
Coal Beneficiation
MoST (PCSIR) 7-10 years Rs. 1200 million Development of Indigenous resources and increase the reliability of fuel availability at affordable prices particularly for the power and construction s ector
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Table A12.3: Alternative Sources of Power Generation Actions Needed Agency Time Expected Cost Expected Benefits
Nuclear Power 10 units of 8500MW by 2030
PAEC
2004- 2030 The estimated cost of generation is Rs. 2.76/Kwh for the 30 years life of the project.
Increase in the supply of reliable energy.
Wind Energy PCRET 5-years The capital cost of establishing a system with a capacity of 500 W is Rs 0.075 million. There is no cost of generation and distribution.
Increase in supply of energy in the remote area, particularly the coastal areas where the speed of wind is appropriate
Solar-Photovoltaic
PCRET 10-15 years The capital cost of production solar-photovoltaic of 1 KW is Rs. 0.5 million and annual operational cost is Rs. 0.015 million.
Available of more reliable energy
Table A12.4: Energy Conservation
Actions Needed Agency Time Expected Cost Expected Benefits
Acquisition of technology for manufacturing of Reflectors
MoST/PCRET/ MoI
7-10 years
Rs. 800 million Energy conservation
R&D in manufacturing and commercialization of copper wire
MoST (PCSIR)/ MoI
7-10 years Rs. 500 million Reduction in system losses
Hydrogen Fuel Cell PCRET 5-10 years Rs. 1 billion.
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Annexure 12.2
PSDP Financial Allocation for Energy (Rs. in Million)
Period Total S&T HRD/ Skill
2005-06 1670 1100 570
2006-07 2026 1186 840
2007-08 2530 1293 1237
2008-09 3256 1413 1843
2009-10 4499 1548 2951
Total 13980 6539 7441
2010-11 5416 1696 3719
2011-12 5853 1860 3993
2012-13 6398 2002 4396
2013-14 6996 2186 4809
2014-15 7666 2361 5305
Total 32328 10106 22222
2015-16 8396 2609 5786
2016-17 9258 2860 6398
2017-18 10166 3145 7020
2018-19 11174 3454 7720
2019-20 11955 3781 8174 Total 50949 15850 35099
Note: The figures for 2005-06 to 2009-10 may not exactly be equal to the total cost of the projects because of throw forward.
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CHAPTER 13
TELECOMMUNICATION
Zafar Mueen Nasir
Notwithstanding the significant progress made by telecom sector in Pakistan in recent years, country still lags behind many of the comparable economies in terms of fixed line density, mobile penetration and internet usage. Since substantial population is still devoid of telecom services, there exists an enormous potential for growth of telecom in the country. To increase the tele-density and provide telecommunication services to public, both the PTCL and the private sector are investing in the telecom industry. The telecom services have expanded at a rate of 9.6 percent over the last five years. The capacity of all the digital transit exchanges has been increased and 1986 cities are connected on NWD system. Digital radio links are used in the areas where fiber optic is not economical. Total 4591 kilometer fiber optic cable has been laid for provision of digital transmission media by connecting 405 cities using latest technology.
To provide telephones services in rural areas, telecommunication facilities have been provided through small digital exchanges, manual exchanges and long distance PCO’s. For International Communications, new Gateway Exchanges were installed at Islamabad/Karachi. Pakistan joined SEA-ME-WE-3, Submarine Optic Fibre Cable in order to have access to more than 39 countries from Western Europe to the Far East. Digital access cross connect systems (DACCS) are being installed to provide high quality digital data, voice and video on leased circuits (National and International). In order to provide high quality digital data and voice circuits to Internet Service Providers (ISPs), Data Network Operating Companies (DNOPs), Software Exporters and Universities, 1249 circuits ranging from 4.8 Kb/s to 2048 Kb/s are working in 33 cities, 93 sites with 181 nodes, having full control from Centralized Network Management System installed in Islamabad.
Various services have been started through business development strategies in the interest of the public to their best satisfaction with latest updated technology in telecom field. The Computerized Directory Assistance System and Computerized Fault Management System (CFMS) have been established in major cities of Pakistan. Value added services included Universal Access Number, Premium Rate Services, Prepaid Calling Cards and Voice Mail have already been offered to customers. In this regard, Interconnect Agreement and O&M contracts with reputed companies/ firms have been made and are operative.
If we take into account the present trend of 15 per cent growth of telephone network, the overall additional demand is projected to be about 29 million over the next five years. It is also projected that the private sector, will meet demand of 10.5 million mobile connection and 6 million fixed lines and the remaining 12.4 Million lines will have to be provided by PTCL. This will raise the telephone density to 35 per hundred in the next ten years. The Transit Network can also be expanded by another 0.4 Million ports to cater for national long distance traffic of these subscribers. But achieving these goals is a challenging job because telecom sector is facing number of problems. Some of them are the low tele-density especially in rural areas, low service standards, inadequate and expensive international connectivity, lack of alternate networks, slow growth of requisite infrastructure in the public sector mainly due to inadequate PSDP allocations and shortage of quality human resource in IT and telecom sector.
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The strategy to develop this sector relies on the active role of private sector in the provision of services. The role of government should be confine to the provision of tax and other incentives and creating conducive environment for private sector. Some of the steps necessary for this purpose are the formulation of procedure for easy access to the bandwidth, expansion of the broadband connectivity for increasing the trade, employment opportunities and the exploration of the possibility of cooperation with the other countries, reduction in tax on telecom equipment to encourage private sector to participate in telecom sector development, and strict monitoring of license obligations for developing the rural area communication networks. Decentralization in the sector for faster decision-making process for the achievement of the targets (ALIS, Services etc) set for the progress of the sector and forecasting of man and material resources to meet the business targets are also important steps.
13.1 INTRODUCTION
Telecommunications and economic growth are strongly correlated; modernization of various sectors of the economy is associated with good communication infrastructure. The telecommunication sector of Pakistan has shown a sharp growth over the last few years. The cellular telephone sector has shown even stronger growth than the fixed line telephony. Pakistan currently has over 3.4 million cellular subscribers; the number of subscribers has increased three-fold in the past three years. Notwithstanding the significant progress telecom sector made in Pakistan in recent years, country still lags behind many of the comparable economies in terms of fixed line density (number of fixed phones per 100 inhabitants), mobile penetration (number of mobile subscribers per 100 inhabitants) and Internet usage. Since substantial population is still devoid of telecom services, there exists an enormous potential for growth of telecom in the country. Pakistan must develop and maintain a high quality telecommunication infrastructure for the provision of affordable world class telecom facilities.
Over the last couple of years internet use has grown at a rate of 60 percent.35 Since the internet use is still quite low, the high growth rate can be sustained over the next few years and under national IT policy government would reduce user cost, extend the services to smaller cities and towns, reduce the prices of personal computers and create awareness of IT and internet in the general public.
The significant progress achieved by Pakistan in the telecommunication and IT sector is however not enough. At present, PTCL, the only operator, is providing all sorts of data and speech communication to the users all over Pakistan. The IT and telecommunication sector has to go a long way to increase the tele -density and access to quality service to the subscribers.
13.2 TELECOM INFRASTRUCTURE
To increase the tele -density and provide telecommunication services to public, both the PTCL and the private sector are investing in the telecom industry. The telecom services have expanded at a rate of 9.6 percent over 1998-99 to 2002-03.
35 IT sector is growing at more than twice the rate as compared to the rest of the economy in Pakistan (see World Telecommunication Development report, 2003).
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Table 13.1: Increased Capacity and Working Connections (1998-2003)
Capacity (lines) Working Connections Year
Increase During the Year Total Increase during the Year Total
1998-1999 283323 3689291 216645 2972772
1999-2000 195476 3884767 151684 3124456
2000-2001 195821 4080588 215738 3340194 2001-2002 244936 4325524 315281 3655475
2002-2003 614630 4940154 327306 3982781
All the 36 digital transit exchanges have been connected through optical fiber system and
1986 cities are connected on NWD system and currently 347 Digital Switch Board Positions are working in 25 cities of the country. The capacity of these digital transit exchanges has increased from 73,126 to 311,400 ports to cater to the needs of the additional load. For low capacity exchanges where optical fiber is not economical, the digital radio links are preferred. Digital transmission media through Digital Radio System on trunk and subsidiary routes has increased from 370 to 1971 links. Total 4591 Kilometer Optical Fiber Cable has been laid for provision of digital transmission media through optical fiber system by connecting 405 cities using latest technology. To provide telephones services in rural areas, telecommunication facilities have been provided through small digital exchanges, manual exchanges and long distance PCO’s.36 The installation of TDMA systems in and around 14 cities were completed. The target of 12800 PCO’s however, could not be met due to high cost and uneconomical investment.
Table 13.2: Promotion of ICT and Bridging the Digital Divide Tele Density Trends (June 2003)
Urban Rural
Province Working Connections
(Million)
Tele Density (%)
Working Connections
(Million)
Tele Density (%)
Total Working Connections
(Million)
Tele Density
%
Punjab 1.83 6.60 0.51 0.92 2.34 2.81 Sindh 0.98 5.60 0.10 0.60 1.09 3.18 NWFP 0.20 5.34 0.21 1.06 0.41 1.74 Baluchistan 0.08 3.92 0.02 0.37 0.11 1.48 Total 3.10 6.08 0.85 0.87 3.95 2.66
For International Communications, new Gateway Exchanges were installed at Islamabad/Karachi. There were only 2529 international telephone circuits working during 1993 which have been increased to 14500 circuits by June 2003 and also digitized. Pakistan joined SEA-ME-WE-3, Submarine Optic Fibre Cable in order to have access to more than 39 countries from Western Europe to the Far East.
Digital access cross connect systems (DACCS) are being installed to provide high quality digital data, voice and video on leased circuits (National and International). In order to provide high quality digital data and voice circuits to Internet Service Providers (ISPs), Data Network Operating Companies (DNOPs), Software Exporters and Universities, 1249 circuits ranging from 4.8 Kb/s to 2048 Kb/s are working in 33 cities, 93 sites with 181 nodes, having full control from Centralized Network Management System installed in Islamabad.
36 There are about 50588 villages in Pakistan having population ranging from 100 to approximately 7,000 inhabitants.
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Three exchanges were established in the major cities in the country (in Islamabad, Lahore and Karachi) at the total cost of Rs 275 Million with the following scope of work.
i) Setting up of a high performance ATM based National Backbone (STM-1/ nE3) ii) To route inter ISPs traffic within Pakistan. iii) To earn more revenue by acquiring large Bandwidth and selling it in small
chunks. iv) To provide full circuit/ shared Internet backbone connectivity. v) To provide different class of services including ABR, CIR and EBR. These
services will be available when the managed service is made available at the far end. At present CAR and traffic shaping will be provided on IP based STM-1
vi) To provide guaranteed Quality of Service.
In 1990, Public Data Network (PDN) was introduced to provide data communication services through packet switched network in Pakistan with only three nodes at Lahore, Karachi and Islamabad. With Telnet packet switches & PADs were used to provide simple dedicated & dial-up access to the registered users at a maximum transmission speed of 9.6 Kb/s and access speed of 2.4/4.8 Kb/s. In April, 1997, 500 customers were subscribed to the Public Data Network, of which about 300 customers were working through dial-up access and 200 through dedicated non-exchange telephone lines besides 7000 internet users. There has been a good progress in this area and as 683 cities were connected on Internet up to 30-6-2003. 13.2.1 Value added Services in Telecom
Various services have been started through Business Development Strategies in the interest of the public to their best satisfaction with latest updated technology in Telecom field. The Computerized Directory Assistance System and Computerized Fault Management System (CFMS) have been established in major cities of Pakistan. Value added services included Universal Access Number, Premium Rate Services, Prepaid Calling Cards and Voice Mail have already been offered to customers. In this regard, Interconnect Agreement and O & M contracts with different reputed companies/ firms have been made and are operative. 13.2.1.1Premium Rate Service (PRS)
Interconnect Agreement with 9 firms (with 60 percent company revenue share and 40 percent PTCL revenue share) have been made in the light of license issued by PTA. These firms / companies are extending services to the customers. 13.2.1.2 Card Pay Phone Service
PTCL has made Interconnect Agreements with 189 companies on the basis of license issued by PTA and further companies are entering into contracts. So for, PTA has issued licenses to 237 companies. Number of payphones installed and functioning through these companies were 127,910 lines in June 2003. 13.2.1.3 Pre-paid Calling Card Service (PCCS)
The prepaid calling service was launched in October 2000, which resulted in overwhelming customer response yielding sales revenue of Rs. 4.4 billion up to June 2003. This necessitated the expansion of existing Intelligent Network System (IN) and the installation of second IN platform facility with added features. The system has been commissioned with 8.5 million cards. For this service, PTCL has made agreement and assigned the task to four companies.
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13.2.1.4 Customer Services Centers/Telegraph Offices
By outsourcing PTCL’s Customer Services Centers/Telegraph Offices, there has been sizeable increase in the revenue with minimum guaranteed fixed revenue targets of 300%. 13.2.1.5 Voice Over Internet Protocol Service (VOIP)
By the end of 2002, the technology for terminating the additional international I/C traffic (3.5-5 Million Minutes on VOIP) was imported form USA and Europe to control & capture the grey market by using voice over IP (VOIP). through five (5) international companies. These operators have been based at Karachi, Lahore & Islamabad. PTCL further intends to launch a low cast VOIP international outgoing service to destinations in USA & Europe. 13.2.1.6 Digital Subscriber Lines Service (DSL)
Digital Subscriber Line (DSL) technology is a copper-loop transmission technology that solves the bottleneck often associated with the last mile between network service providers and the users of these network services. It is an access technology, deployed in the local access network. DSL technology achieves broadband speeds over the most universal network medium in the world. It offers dramatic speed improvements (upto 8+MBPS) compared with other network access methods. The real strength of DSL based services lies in:
- Multimedia Applications required by today’s Network users.
- Performance & reliability
- Economy
DSL technology allows the Network Service provider and the service users to take full advantage of the existing infrastructure such as Frame Relay, ATM and IP. DSL can also easily support advanced business class services like voice over DSL (Vo DSL)) with the newest generations of DSL equipment offering end to end service level management (SLM). This service has also been extended through 4 firms (under contractual obligations with PTCL) to the public and is in operation since 2002. More firms will participate in future. 13.2.1.7 Mobile Services
At present 6 operators are providing mobile services to the public. PTCL is providing necessary connectivity requirements to these mobile operators.
13.2.1.8 Wireless Payphone Service (WPS)
Although O&M contracts with 4 firms/companies were made, but only one company has started service so far. The said company has developed wireless payphone service network by installing main switch at Karachi and Islamabad covering different cities / towns/ sites and further developing and expanding the network. By June 2003, a total number of 8985 wireless pay phones were working and expected to increase rapidly.
13.2.1.9 Data Communications & Internet Services
International data services are leased to customers like, Data Network Operators, corporate customers ISPs, software exporters and call centers etc. For International Bandwidth Services, in addition to the existing STM-I connectively via SEA-ME-WE-3 Western Segment, one STM-1 internet connectivity via Eastern Segment of SEA-ME-WE-3 has also been added in April 2003 on the Pakistan Internet Exchange. After completion of one year commitment period in May 2003, 34 Mbps via SEA-ME-WE-3 from EMIX-UAE was terminated in May. In addition
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34 MB full duplex satellite IP bandwidth from British Telecom and 43 MB simplex download satellite IP bandwidth from Intelsat is leased for Pakistan Internet exchange for reliability and internet bandwidth services. 13.2.1.10 SEA-ME-WE-4
SEA-ME-WE-3 is the only Submarine Optical Fiber Cable, which is used for international voice and data traffic. In case of failure of SEA-ME-WE-3, the traffic is shifted via satellite. SEA-ME-WE-4 cable of capacity 462,857 MIU KM will be allocated to PTCL, this includes SDH equipment of 46 STM-1 and will be installed at cable station in Hawksbay Karachi. Backbone system of 10 GB ring network is provided between Hawksbay – Marston Road and Pak Capital. 13.2.1.11 Intelligent Network (IN)
Presently following services are offered to the customers by using the IN Platform. § Free Phone Service: § Prepaid Calling Card § Premium Rate § Virtual Private Network (VPN) § Universal Access Number (UAN)
13.2.1.12 Billing System
To overcome delay in billing, eliminate errors, and getting rid of the backup of data in the system for more than one month, the billing system has been regionalized and the offices of senior accounts officers are being automated.
13.3 DEMAND FORECAST
Demand for telephone is dependent on various parameters like the economic growth of the country and the tariff structure. If we take into account the present trend of growth of telephone network i.e. 15 percent, the overall additional demand is projected to be about 29 million over the next five years. The projected annual increase in fixed and mobile phones is depicted in the following chart.
Chart13.1: GROWTH OF ALI LINES (M)
3.69 3.88 4.08 4.334.94
5.4
8.4
11.1
13.3
15.6
17.8
0
2
4
6
8
10
12
14
16
18
20
1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009
YEARS
ALI
LIN
ES
IN
MIL
LIO
NS
It is also projected that the private sector, will meet demand of 10.5 million mobile connection and 6 million fixed lines and the remaining 12.4 Million lines will have to be provided
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by PTCL. This will raise the telephone density from 2.66 telephones per hundred populations at present to 35 per hundred in the next ten years. The Transit Network can also be expanded by another 0.4 Million ports to cater for national long distance traffic of these subscribers.
13.4 MAJOR ISSUES IN THE TELECOM SECTOR
The telecom sector is facing number of challenges which need immediate attention. Some of them are:
• Low tele-density especially in rural areas which is about 1.14% • Low service standards. • Inadequate and expensive international connectivity. • Lack of alternate networks. • Slow growth of requisite infrastructure in the public sector mainly due to
inadequate PSDP allocations. • Lack of disaster recovery, data warehouse and dearth of international call centers • Lack of network security, strategy and awareness. • Shortage of quality human resource in IT and telecom sector. • Lack of R&D in the telecom sector for indigenous production of telecom
equipment. Moreover lack of co-ordination for the sharing of experience among the telecom R&D & manufacturing companies and universities.
• Low broadband penetration and high frequency charges. • Restrictions on establishment of base-stations for mobile cellular telephony. • At present there was about 55% tax on the cable by the government, which is on
the high side. 13.5 STRATEGY /ACTION PLAN
The main elements of the strategy are to enhance the role of private sector in the provision of services. The role of government should be confine to the provision of tax and other incentives and creating conducive environment for private sector. Some of the steps necessary for this purpose are:
• Formulation of procedure for easy access to the bandwidth because due to the monopoly of PTCL and the NTC; access to the bandwidth is restrictive. Private sector needs to be involved in the establishment of the broadband network. Although Pakistan had sufficient bandwidth and that only 35% of the available capacity of the backbone is being utilized.
• Expansion of the broadband connectivity for increasing the trade, employment opportunities and the exploration of the possibility of cooperation with the other countries.
• Reduction in tax on telecom equipment to encourage private sector to participate in telecom sector development.
• Strict monitoring of license obligations for developing the rural area communication networks.
• Currently incoming calls are not allowed on payphones in the rural areas. By allowing these, demand for these services will increase drastically.
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• Formulation of a comprehensive national plan for laying of optical fiber by involving the key market players.
• Introduction of the 3rd party validation with the help of the private sector to check on the service standards and develop strategy to improve the services
• There is need to formulate the network security policy. • Establishment of disaster recovery, data warehouse. • Decentralization in the sector for faster decision-making process for the
achievement of the targets (ALIS, Services etc) set for the progress of the sector. • Identification of areas that can be controlled to reduce the Operational
expenditure line. • Forecasting of man and material resources to meet the business targets. In order to promote local manufacture of the telecom equipment; the government should
provide the following incentives to the private companies:
• Necessary training of manpower so that sufficient trained manpower should be available for the industry as well as for R&D work. Investment in R&D for introduction of new technologies with network solutions will be a good step forward.
• R&D Fund could be used by the government for the customization of the product so as to enhance the capability of the manufacturing industry.
• Development of the local vendor/ support industry e.g. the plastic industry that should be developed so as to provide quality support products for the main industry.
• Rapidly migrate from circuit switched to packet switched technology in backbone network including loading of spare dark fibers to Gb capacities bringing down bandwidth costs.
• Ensure timely upgrade of switching and transmission media capacity (2 to 3 times the current capacity) in order to cater for the increase in traffic due to market based tariffs.
• Invest in multiple – submarine-fiber-optic projects for Gb bandwidth capacities. • Introduction of PTCL’s own DSL broadband services – this will help retain the
corporate customer (with a mix of services such as Voice over DSL), before the launch of PTCL’s OFAN based corporate services.
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Annexure 13.1
TELECOM SECTOR DE-REGULATION
Pakistan is a signatory to the 1997 WTO Agreement on Basic Telecommunications (WTO-ABT) and has made specific commitments on market opening, and subscribes to a Reference Paper on regulatory principles. The telecommunications sector in Pakistan is accordingly being restructured over the last 5 years to improve its performance and eliminate bottlenecks. The major objectives of the de-regulation policy are to:
o Liberalize the telecom sector by encouraging fair competition amongst service providers.
o Increase service choice for customers of Telecom services at competitive and affordable rates and accelerate expansion of telecom infrastructure to extend telecom services to un-served and under-served areas.
o Increase private investment in the telecom sector and encourager local telecom manufacturing/service industry.
o Maintain an effective and well-defined regulatory regime that is consistent with international best practices.
o Maintain consistency with Pakistan’s IT and Internet promotion policy of low prices for bandwidth to make Internet access affordable.
To achieve these objectives, necessary legislation has been passed to separate the commercial operations from policy and regulation. A new state owned entity viz Pakistan Telecommunications Corporation was created out of the then T&T Department, through the PTC Act 1991. At the same time the Government continued to encourage private sector and awarded licenses for cellular pay phones and paging services. Since 1991 the Ministry of Communications has started granting licenses on data and Internet services and has removed controls on telecom terminal equipment manufacturing. In 1995, one of the major milestones in re-structuring was achieved, when a new legal framework in the form of the Pakistan (Re-organization) Ordinance was passed. This was later enacted by the parliament in 1996 as the Pakistan Telecommunications reorganization Act 1996 leading to the creation of the following five bodies: -
Pakistan Telecommunications Authority – Regulates the Telecom Sector to cater for complaints, tariffs, issuance of licenses/ renewal of licenses, monitoring of private operations
Frequency Allocation Board – Manages and monitors frequency spectrum management
National Telecommunications Corporation (NTC) – Provides services to public sector organizations
Pakistan Telecommunications Company Ltd (PTCL) – Converted to public limited company under the companies Ordinance 1984 – provides domestic and international telecommunications services to all customers other than those served by the NTCPakistan Telecommunications Employees Trust – Disburses pension and other benefits to the employees of the PTCL.
Telecom Deregulation Policy 2003
The Telecom Deregulation Policy enacted in 2003 was based on an assessment of the overall performance of the telecommunications sector with a view to meet its WTO-ABT
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commitments. The policy formally sets out the Federal Governments market opening framework and establishes important elements of the structure for new competitive entry in the telecommunication sector, and addresses many of the detailed issues concerning the issuance of new licenses. It is intended to achieve a number of important objectives, notably:
• Increase service choice for customers
• Promote infrastructure development, especially infrastructure that will increase tele-density.
• Increase private investment in the telecommunication sector
• Encourage fair competition amongst service providers
Under the 2003 policy, Fixed line Telecommunications Sector in Pakistan was opened and the exclusivity of PTCL in basic telephony has been abolished Two types of licenses have been issued by PTA, Local Loop (LL) and Long Distance & International (LDI) licenses – Both licenses are un-restricted and open.
Mobile Cellular Policy 2003
The mobile policy is aimed at the promotion of efficient use of the spectrum for the national benefit, increasing service choice for customers of cellular mobile services at competitive and affordable rates and increasing private investment in cellular mobile operators with the ultimate objective of meeting the demand in the years ahead. The policy also aims at the recognition of the rights and obligations of mobile cellular operators and to provide fair competition amongst mobile and fixed line operators. This was an effort for creating an effective and well-defined regulatory regime that is consistent with International best practice.
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PTCL’S QUALITY OF SERVICE (VOICE)
QUALITY PARAMETER 2003-04 2008-09
Faults/100 Customers/month 4 1
Call Failure Rate
Local Calls 3% 1%
NWD Calls 5% 1.5%
ISD I/C 9% 2%
ISD O/G 5% 1.5%
Answer to Seizure Ratio
Inwards 50% 60%
Outwards 60% 70%
Fault Clearance % within
24 hours 90% 95%
48 hours 10% 5%
72 hours 3% 0%
% of Billing Error 0.1% 0%
% of current bill delivered within days of due date 99% 100%
Directory Response Time 95% in 10 Sec 100% in 10 Sec
Allocations and Expenditure during 1998-2003
No. YEAR
ADP SIZE IN Rs. (Million)
EXPENDITURE IN Rs. (Million)
% AGE UTILIZATION
1.
1998-1999 Rs, 14,000.00 11,758 84
2. 1999-2000 Rs. 15,200.00 13,665 90
3. 2000-2001 Rs. 15,195.00 8,654 57
4. 2001-2002 Rs. 16,500.00 10,104 61
5. 2002-2003 Rs. 19,400.00 11,163 58
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INTELLIGENT NETWORKS Following services can be introduced in 5-10 years time period.
1. Tele-voting 2. Home Country Direct 3. Prepayment Telephony 4. Utility Bill Payment. 5. International Toll Free Service 6. International Collect Call Service 7. Number portability 8. Audio Conference for 10 Persons 9. Credit Card Calling (Visa, Master Card, American Express, Diners
Club). 10. Universal Personal Telecommunication 11. Universal Personal Number 12. VPN 13. AAB – Automatic Alternative Billing 14. CD – Call Distribution 15. CRD – Called Rerouting Distribution 16. Completion of calls to busy subscriber 17. DCR – Destination Call Routing 18. FMD – Follow me diversion 19. MAS – Mass Calling 20. SPL – Split Charging 21. UDR – User Defined Routing 22. Sponsorship Services
New Services
1. Whole sale of pre-paid minutes 2. Video Conferences 3. Voice over DSL Services 4. IPVPN & Managed VPN Services 5. ATM & FR Services 6. V SAT Services 7. Tele Marketing 8. Post Paid Calling Card 9. IP Centrex Services 10. ASP Services 11. Hosting Services 12. Digital Feature re-launch 13. Home Country Direct 14. Fixed Wireless Telephony
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15. Internet Call Waiting 16. Tele Voting 17. Call-in Service 18. Introduction of fixed line SMS 19. Cable TV and Multi Media Services 20. Collect Calling (International) 21. Basic DSL Services 22. Re-launch ISDN Services 23. Flexible Billing Solution 24. Launch IP Based Services 25. Global Calling Card 26. Voice Package solutions with free local calls 27. Flexible payment options
28. Unified Messaging
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CHAPTER 14
INFORMATION TECHNOLOGY
Aamir Matin
With perhaps every global IT company in the world having a presence in Pakistan, and with revenues growing by 30-40% year on year, the IT industry is probably the most exciting and dynamic sector in the country today. An industry characterized by about 60,000 professionals, major ongoing IT projects within government and the private sector to the tune of hundreds of millions of US dollars, and world class software product and services companies bears testimony to the vibrancy of the IT and IT enabled services sector in Pakistan. A legal and regulatory framework that has seen legislation on Electronic Transactions implemented, and draft bills for E-Crimes and Data Protection on the anvil, has contributed to the growth in e-business. The convergence of communications, computing, and entertainment has resulted in the blurring of boundaries between disciplines and IT companies now come in all shapes and sizes. IT has indeed been taken out of the closet and has been mainstreamed into every aspect of industrial and economic activity within the country.
14.1 INTRODUCTION
Information Technology in Pakistan has become an integral part of the economy, and is playing an ever increasing role in the industrial and services sector. The business community in the country has finally understood the value that automation can add to their commercial concerns, by driving down costs, improving productivity, reducing time to market and providing quality services to their customers. This is borne out by the fact during fiscal year 2003-2004, over US $ 200 million was invested by the financial services sector into Information Technology products and services. The banking sector in particular has dramatically increased its dependence on the use of IT, as is evident by the growth in the number of branches that are connected online. Likewise, the number of Automated Teller Machines (ATMs) and the use of automated cheque clearing and other back end systems within the banking community has increased. Customer relationship management systems have been deployed, and online banking is de rigueur. Within the industrial sector, the use of Enterprise Resource Planning software has become commonplace. Multinational companies as well as the Pakistani corporate sector have all deployed high end ERP solutions. The textile sector is investing heavily into specialized software and IT solutions to reduce costs and improve quality. The government has not lagged behind, with the more mundane applications such as office automation and budgeting currently being developed. The revenue services have massive IT projects in the pipeline, as have the audit branch within governmental finance.
Complex logistics systems for the armed force, sophisticated intelligence gathering and sifting systems for the inte lligence agencies, guidance and control systems for missiles, simulators for nuclear plants, avionics software for fighter aircraft, and computer aided design and manufacturing systems for submarines are examples from the defence sector. The airline industry is another enthusiastic user of IT, with a few being totally automated, there being no paper ticket whatsoever. Couriers and other similar players use hand held devices to interact with their base stations, and packages are being tracked in real time. Stocks are traded online, and the Commodities Exchange set to start operations in April 2005 is one of the most advanced
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implementations of its kind anywhere. The electronic media has not been left behind, and state of the art IT solutions are being used by these companies to record, produce, edit, transmit and otherwise manage their entire operations.
The common thread that runs through the above illustrative examples is that IT is alive and well in the country. The skill sets in demand in the industry have changed, but the number of individuals employed as well as the amounts of money changing hands has increased manifold over the past few years.
14.1.1 Contribution of IT towards growth in GDP
Information Technology has a major contribution to make in enhancing GDP, in particular through the following :
a. Directly, through exports of IT and IT enabled services b. Indirectly, by increasing productivity in virtually every field of economic activity, thus
contributing directly to growth c. Indirectly, by enhancing accountability and transparency within government, leading to
good governance
Apart from anecdotal evidence, there is much academic research that demonstrates a clear linkage between investment in IT and growth in GDP. “Low levels of investment in IT slow development of a country’s IT infrastructure and result in lower economic productivity. In countries that under invested in IT capital (average IT capital share of total capital is 2.1 percent), economic productivity is one-fourth of the productivity found in countries with economies that have relatively high levels of investment in IT (average IT capital share of total capital is 7.5 percent).1 In a seminal study on the contribution of Information and Communication Technology to output growth: a study of the G7 countries2, conducted by the OECD in 2000, that uses a Well-established growth accounting framework to assess the role of ICTs as capital inputs and the contribution of these capital inputs to output growth, the report finds that ICT capital goods have been important contributors to economic growth. According to the findings, overall, the contribution of ICT capital to output growth has been significant and rising in relative terms. 14.2 ISSUES AND CHALLENGES
14.2.1 Low E-Readiness
“E-Readiness” is essentially a measure of its e-business environment, a collection of factors that indicate how amenable a market is to internet based opportunities. The criteria used assesses a country’s connectivity technology infrastructure, general bus iness environment, the degree to which e-business is being adopted by consumers and companies, social and cultural conditions that influence internet usage, the legal and policy environment and the availability of services to support e-businesses.
14.2.2 Lack of awareness and top management commitment The industrial sector in the country, whether this be large scale manufacturing or the smaller unorganized sector, does not as yet fully embrace IT as a means to enhance competiveness. Without top management commitment, automation efforts will not deliver the promised results. The same is true for the public sector, where the majority of the government departments are not totally committed to driving their automation projects all the way through to completion.
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14.2.3 Quality of professional IT and managerial staff
Implementing an IT based solution within large organizations requires a multidisciplinary approach, incorporating both technology experts as well as those with a management skill set. This combination is hard to come by, with the result that IT solutions, once implemented, fail to bring about the desired reduction in costs and improvements in quality. 14.2.4 Negative country perception
Exporting products such as carpets, cotton, engineering goods and other similar items is a one off affair. Political instability, geo strategic concerns, and the negative perception that the buyer might have about the country from which the goods are being exported do not play any role in the buying decision, whereas in the services businesses, where the buyer expects to develop a long term relationship, a strong component of trust is needed before any transactions can take place. 14.3 MAJOR STRATEGIES, OBJECTIVES AND TARGETS
14.3.1 E-Government Strategy
E-Government has proven to be an effective means for good governance. It was with this in mind that an Electronic Government Directorate was established in October 2002 for generating greater focus on e-government. From the standpoint of the e-government program following are the key considerations in moving forward:
• E-government is a massive and complex transformation which requires the support of the top-level leadership.
• The implementation can only be done with the concerted effort of all the Ministries and not just the IT Ministry alone. The ownership of the processes and the will to change must be driven by senior most officers in all the concerned ministries.
• Capacity building is required within the target Ministries as well as the IT Ministry.
• The Business Processes, or the way we do business, would have to be changed if we are to make full use of e-government. The necessary rules, regulations, and instructions would have to be modified.
• Some of the building blocks have already been implemented, while others are under implementation through individual projects. With this experience we are now in a position to propose an integrated implementation plan for the entire Federal Government.
• The implementation has distinct phases and while for a given Min istry each preceding phase is either implemented prior to, or in parallel with a subsequent phase, some Ministries can be in advanced phases of implementation than others. The various phase of implementation and the approach of deployment are provided later in this summary.
The formation of the National E-Government Council (NEGC), chaired by the Prime
Minister of Pakistan, is a significant step in gaining sponsorship for the program.
Through the NEGC it can be expected that the Federal Secretaries would take ownership
of the e-government program pertaining to their Divisions and drive the transformation.
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14.3.1.1 E-Government Results
By executing the above strategy it is expected that within the next 3-5 years, the e-
government program would have achieved the following milestones:
• Land Record management (the Patwari system) will have been automated in at least 50% of the districts throughout the country.
• All internal functions, including file movement, of the Federal Ministries will be done electronically, supported by effective tracking and management tools.
• The information required for processing cases would be available online and cases would be disposed off swiftly. Cases will reach the decision maker through the shortest possible route, and the availability of online information to all users concurrently will eliminate the need to route cases purely for information.
• Electronic processing would facilitate the measurement of service response time. Nominal time for key services would be set and deviations would be automatically detected and brought to the attention of the decision makers, leading to good governance.
• All Federal Government employees of Grade 6 and above will be proficient in the use of IT for their day to day activities.
• Other than confidential correspondence all inter-Ministerial communication would be done electronically, eliminating thousands of print pages generated daily and cutting the time of processing from weeks, and sometimes months, to a matter or hours and days.
• Budget Preparation and Fund Release Processing, which takes massive amount of paper correspondence between all the Ministries and M/O Finance and P&D will be done electronically. The total processing time would be reduced by at least 50%.
• All citizen centric services being offered by the Central Board of Revenue would be automated.
• The Portal of the Government of Pakistan would be up to date and have information that can be used by the citizens as well as investors and other international users.
14.3.2 Exports of IT and IT enabled services
On the exports front, the numbers that were stagnant for some years have shown good results during fiscal year 2003-2004 when exports went upto US $ 32.88 million from US $ 22.62 million during fiscal year 2002-2003. Export figures for year 2001-2002 were US $ 19.85 and in 2000-2001 this number was US $ 20.12. This growth of about 50% during the latest fiscal year has been possible due to the efforts of the private sector and the general upturn in the international marketplace. The support provided by the Ministry of IT and Telecom, through the Pakistan Software Export Board, has also played some part in this growth.
The IT industry within the country can be categorized as follows:
A. The traditional “software house” that develops custom made applications a. This subsector of the industry is slowly but surely declining, following trends
that are visible worldwide. Custom built applications are no longer cost effective nor viable for any enterprise, given the vast array of software products that are available for companies ranging from small shops to major industrial concerns.
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b. The number of pure play software houses is declining, but those that remain are growing in terms of employees and turnover.
B. The “System Integrators” that provide total solutions a. This subsector of the industry is rapidly growing within the country, as more and
more of the projects are being outsourced on a turnkey basis. These companies put together the hardware, the data communication infrastructure, and the software package, as well as provide the implementation support and training that is required to ensure that the entire solution is implemented and that it delivers the business benefits that were expected of it.
C. The “Internet Service Providers” and other similar entitities a. This sub sector has seen growth but there has been some consolidation given the
large number of companies that had mushroomed rapidly. Growth is still rapid in this sector, with the introduction of broadband services.
D. The “multinationals” that sell prepackaged software or hardware a. This sub sector has also seen change take place over the past years. Nearly all the
multinationals now use a channel mechanism to carry out their business, whether this be personal computers or it be software such as database management systems or office automation products. This change of approach has resulted in growth in the small to medium enterprise sector, with many Pakistani owned companies becoming business partners with the global IT giants.
E. The “IT enabled Services” or “Business Process Outsourcing sector a. The Call Center companies
i. Growth in this segment is rapid, with currently 1800 individuals employed in this industry servicing international clients and another 2500 providing call center services to domestic customers. Growth is expected to be as high as 60% per annum for the next two years.
b. The Medical and Legal Transcription subsector i. This has been a cyclical industry but the upturn is being seen since 2003,
with current employment numbers being about 1000 individuals. c. Other outsourced services such as accounting and engineering design
i. There are a very few companies that provide such services but revenues naturally reflect the high value addition that such companies provide to their clientele.
14.3.2.1 Strategy to promote exports of IT and ITeS
The strategy to promote exports of IT and ITeS from the country is given below. This has been discussed at great length by various stakeholders in the country covering the entire cross section of the industry, ranging from software companies, hardware vendors, end users, corporate IT heads academia and others. The major point to note here is that the strategy that has been developed is not simply to replicate what other countries in our region have done, but to intelligently adapt “best practices” from successes of others and tailor these to suit ground realities in Pakistan as well as the rapidly changing dynamics of the IT industry globally.
The significant elements of the strategy are :
• Offer innovative incentives to strategic foreign partners
The large IT multinationals and other similar companies have been selling their products in Pakistan without any thought being given to developing strategic relationships with these companies. Such relationships can take the form of these companies setting up software
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development centers in Pakistan, or awarding R&D projects to Pakistani Universities, or using Pakistani expertise to localize their software products. • Approach multinationals that already have significant investment in Pakistan
A major problem faced by the Pakistani IT industry is the poor international image that inhibits potential customers from engaging with any Pakistani entity. However this issue is not a problem with companies that are already present in Pakistan. These companies have profited greatly by their business operations in Pakistan and hence the negative perception that Pakistan might have will not be an issue.
• Focus on selected areas for outsourcing / call center industry
ü Accounting ü Mechanical Engineering Design (automobile spare parts) and Defence Industries ü Insurance claim processing
• Support domestic software industry by encouraging government and other entities to outsource IT and BPO projects to local companies
This is not to imply that large complex projects should be given out to inexperienced companies. Even if the solution has to be imported from abroad, the deployment, customization and training should be carried out by local partners.
• Promote “Productization” amongst software companies
The global paradigm shift away from customized solutions towards the use of pre packaged software implies that Pakistani companies should look at developing products as opposed to looking for projects that involve custom software development.
• Strengthen academic R&D with emphasis on linkages with Industry and Defence 14.3.2.2 Three year targets for export of IT and IT enabled services
• Employment figures within this industry sub segment will grow by 30% year-to-year growth
• Number of Call Center agents / BPO employees to grow from current 4,000 to 15,000 • Exports from IT and ITeS will grow from US $ 33 million to US $ 120 million by fiscal
year 2006-2007 • Five well known Pakistani industrial groups will have invested heavily in the ITeS sector • Five software companies will have been assessed at CMM Level 5 • Would have become a significant outsourcing partner of the UK / USA in the field of
back office accounting 14.3.3 E-Readiness
The various criteria that are used to determine E-Readiness are explained in Section 14.2.1. Some of these fall within the domain of the telecommunications infrastructure which is dealt with under a separate Chapter. However, providing the necessary legal and regulatory framework within which e-business can be facilitated is the responsibility of the Government. To this end, a number of laws need to be drafted and formally legislated through Parliament. These include the E-Crimes bill as well as the draft law on Data Protection. A specialized E-Tribunal will need to be set up to cater for specialized issues that might arise in telecommunication and information technology related issues. Regulations that need to be issued in line with the
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Electronic Transactions Ordinance are also planned for the next couple of years, as and when the requirement arises. With the increase in usage of the internet to carry out business transactions, there will be a corresponding increase in the requirement to develop capacity to provide security to these transactions. Internet security and the capacity to investigate and prosecute financial fraud committed over the internet hence takes on a serious dimension and efforts need to be made to rapidly address this issue. Strengthening the National Response Center for Computer Crimes (NR3C) is an integral part of the government’s efforts to cater for this critical area. The private sector’s effort to set up a Certification Authority (NIFT) will be supported and others will be encouraged to set up specialized CAs as required.
Table 14.1: Future Investment Program
Programme 2005-06 2006-07 2007-08 2008-09 2009-10 Total Cost
E-Government 661.5 718.2 756 850.5 1020.6 4006.8
IT Industry Development 420 456 480 540 648 2544
Human Resource Dev. (Schools and Colleges)
420 456 480 540 648 2544
IT Training of Govt. Employee 315 342 360 405 486 1908
Open Source Programme 45.5 49.4 52 58.5 70.2 275.6
E-Commerce Programme 45.5 49.4 52 58.5 70.2 275.6
Skilled Based Training Programme
315 342 360 405 486 1908
National and Regional Language Software Development
35 38 40 45 54 212
Industrial Automation Project 231 250.8 264 297 356.4 1399.2
GIS 45.5 49.4 52 58.5 70.2 275.6
Network Security 21.0 22.8 24.0 27.0 32.4 127.2
Other Projects 945 1026 1080 1215 1458 5724
Total 3500 3800 4000 4500 5400 21200
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Table 14.2: Portfolio of Major Projects Software Applications Ministry Responsible Estimated
expenditure Target
Completion (Plan Year)
Computerization of Land Record Provincial I.T./ Revenue Departments
2 billion 2008
Registration of immovable Property
Provincial I.T./ Revenue Departments
0.5 billion 2008
Database of Court Cases for Superior and Subordinate Judiciary
Provincial I.T./Law Department/ M/o Law & Parliamentary Affairs
2 billion 2006
Taxation System Central Board of Revenues - 2007
Police Administration System for the control of crimes including confinement data
Ministry of Interior/ M/o I.T.
500 million 2006
Vehicle Registration & Driving License Permits
Ministry of Interior/Prov. I.T. Depatt
200 million 2006
Registration of Arms Licenses Ministry of Interior/Prov. I.T. Deptt
100 million 2009
Pakistan Culture & Tourist Guide on Internet
Ministry of Culture & Tourism 50 million 2009
Integrated Financial Management System
Ministry of Planning & Development/M/o I.T.
100 million 2010
Public Health and Information System
Ministry of Health/Prov. I.T. Deptt.
50 million 2006
IT training to Federal/Provincial Govt. employees i.e. 60000 Federal/Provincial employees
Ministry of I.T. 240 million 2010
Provision of IT Infrastructure in 100% of Schools/Colleges
Ministry of I.T/ Provincial Govt) 5 billion 2010
Provision of manpower to 25% Middle schools
Ministry of I.T/ Provincial Govt) 4 billion 2010
Implementation of a software technology park at Pakistan Computer Bureau.
Ministry of IT 600 Million 2008
Provision of IT Infrastructure for introduction of E-Govt activities at selected Ministries/Divisions
Ministry of IT One billion 2005
Federal Government Data Centre Ministry of IT 461 million 2007 E-Services for Food & Agri. Sector Ministry of IT/MinFAL 162.7
million 2008
E-Services of Islamabad Police Ministry of IT/ICT Police 110.9 million
2007
E-Services for CDA Ministry of IT/CDA 175.6 million
2007
E-Services at Chief/Deputy Commissioner’s Office
Ministry of IT/Chief Commissioners Office
80.4 million 2007
IT Programme for Districts Ministry of IT 86.5 million 2006
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Annexure 14.1 PSDP Financial Allocation for IT (Rs. in Million)
Period Total S&T HRD/ Skill
2005-06 1754 1050 704
2006-07 2181 1125 1056
2007-08 2792 1215 1577
2008-09 3703 1318 2384
2009-10 5316 1437 3879
Total 15745 6145 9600
2010-11 6553 1574 4979
2011-12 7170 1726 5443
2012-13 7866 1899 5967
2013-14 8712 2108 6605
2014-15 9705 2360 7345
Total 40006 9666 30339
2015-16 10915 2656 8259
2016-17 12343 3001 9342
2017-18 13849 3391 10458
2018-19 15504 3810 11694
2019-20 16627 4140 12487 Total 69239 16997 52242
Note: The figures for 2005-06 to 2009-10 may not exactly be equal to the total cost of the projects because of throw forward.
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CHAPTER 15
FINANCIAL SECTOR
Musleh ud Din
A well-functioning financial system that efficiently channels investible funds to most productive uses is essential for industrial development and growth. Recognizing the importance of financial reforms in the process of industrial development and economic growth, a series of measures have been adopted in recent years with a view to removing various distortions in the financial system, minimizing government’s interference in the banking system, and strengthening the prudential regulations. While these measures have led to an improvement in the financial system, much more needs to be done to transform the financial sector into an efficient and market-driven financial system.
Pakistan must continue the reform process with particular emphasis on: ensuring autonomy and competence of the regulators and promoting professional management at all levels of decision making in the financial institutions; implementing the privatization process efficiently and prudently so that 90 percent of the banking assets are in the private hands; restructuring and strengthening non-banking finance companies to make them an integral part of financial services industries; further enhancing the institutional capacity of the State Bank of Pakistan (the central bank of Pakistan) and, Securities and Exchange Commission of Pakistan (SECP) in becoming effective regulators and supervisor of the financial system; automating the existing manual systems (banking operations); and developing local and wide area networks, connecting various departments and offices across the country.
15.1 INTRODUCTION
A well-functioning financial system that efficiently channels investible funds to most productive uses is essential for industrial development and growth. Unfortunately, due mainly to inefficiencies in the financial sector in the past, lack of access to formal credit channels has been a major impediment in the expansion of the industrial sector. Recognizing the importance of financial reforms in the process of industrial development and economic growth, a series of measures have been adopted in recent years with a view to removing various distortions in the financial system, minimizing government’s interference in the banking system, and strengthening the prudential regulations. While these measures have led to an improvement in the financial system, much more needs to be done to transform the financial sector into an efficient and market-driven financial system. 15.2 MAJOR ISSUES AND THE REFORM PROCESS
15.2.1 Financial Liberalization
Prior to the 1990s the financial sector was dominated by the public sector: in June 1990, public sector assets stood at 93.8 percent of the total assets of the financial system. During the 1990s, the financial sector was liberalized by allowing the operations of domestic private banks. The response of the private sector was very encouraging and 10 new private banks started their operations in 1991 and now 23 private domestic banks are operating in the country (including
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HBL, ABL, MCB and UBL). Further process of the privatization of the existing five nationalized commercial banks started in early 1990s and by now except one bank (National Bank of Pakistan), more than 50 percent shares of the public sector have been privatized. Foreign banks have been operating in the country prior to 1990 and now there are 14 foreign banks.
Exchange and Payment Reforms were initiated in 1991 to provide a conducive environment for international trade, foreign exchange mobilization and foreign investment. Upper limits for remittances for various activities abroad were relaxed and some of the restrictions were completely removed and money changers were allowed to sell and purchase foreign currency. Recently Foreign Exchange Companies (FECs) have been allowed with a view to reducing the volume of the transactions through unauthorized money changers in the kerb market. It is expected that these companies will help to wipe out the undocumented market of foreign exchange. Similarly, the limits for the handling and use of foreign exchange were relaxed for exporters and importers. Further, after accepting the obligation under Article VII of IMF agreement, the Rupee has been made convertible on current international transactions. 15.2.2 Globalization and International Capital Flows
Developing countries are becoming increasingly integrated into the global financial system, following the liberalization of financial markets of recipient and source countries. Thanks to heightened international capital mobility, the magnitude of private flows (including FDI) now overwhelms official financing. In recent years, Pakistan has also witnessed a surge in private capital inflows especially in the form of remittances from abroad. This has resulted in huge accumulation of reserves and since June 2001 reserves held by the SBP have increased twelve times to $ 12 billion. In order to avoid any risk to the domestic banking sector because of reserve accumulation, SBP has pursued effectively the sterilization policy. Despite the fact that this policy entails costs to the central bank, it is necessary for the stabilization of the banking sector. Similarly, due to the sterilization policy, Banks’ investment in government securities has also increased, and this needs to be managed prudently.
Portfolio investment in Pakistan has also seen a rising trend. It is well understood that private flows such as portfolio investment can often be volatile and may thus destabilize the recipient economies. To avoid the potential risks attached with short term capital flows, Pakistan needs to strengthen its domestic financial system through good governance and prudent regulations.
Foreign Direct Investment (FDI) has also changed the whole dynamics of capital flows to developing countries, but it is less risky than portfolio flows. In this regard, Pakistan also adopted liberal and incentive based policies to attract the flows of FDI. For instance, Pakistan has allowed 100 percent foreign equity and eased other related policies to provide a conducive environment for foreign investors. 15.2.3 Role of the Central Bank
The importance of the central bank in the formulation and implementation of the financial reforms and its liberalization can not be overemphasized. In particular, credibility of the central bank has a significant impact on the formulation of the market perception. Before the reform process, SBP’s role as a central bank had considerably weakened due to the presence of Pakistan Banking Council (PBC), which was holding and supervising all the nationalized commercial banks. Due to this duplicated regulatory environment, SBP was not in a position to regulate the banking sector properly, and also the monetary policy was becoming inefficient.
Several steps have been taken to improve the capacity of SBP to regulate the financial sector and implement the monetary policy independently. These include the autonomy of the
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bank through amendment in the SBP Act in 1994, which was further amended in 1997 to enhance the autonomy. As part of internal restructuring of SBP, new departments were established to monitor the market situation more effectively. Rules of business were charted out which also require the Non-banking Financial Institutions (NBFIs) to submit the periodic returns for their evaluation. In 1991, Central Information Bureau (CIB) was established that provides information of all borrowers with liabilities of more than Rs 1.0 million. This helps SBP to enhance its surveillance in the market.
The inception of SBP 3-Day repo facility and auction process helped in the promotion of secondary market for the government securities (T-bills and PIBs/FIBs). Open Market Operations (OMOs) of SBP started in January 1995 and were used not only for draining the excess liquidity in the market but also for injection of funds for the liquidity management. 15.2.4 Governance in the Financial Sector
Reforms to improve corporate governance have been initiated which include fit and proper test for board members and chief executives, compliance with the code of ethics and business practices, and strong internal audit and controls. Pakistan Banking Counsel has been dissolved and the appointments of chairmen/presidents/members in nationalized banks and other private organizations are required to be cleared by SBP. During the process, license of a commercial bank has been cancelled, ownership and management changed in two banks and several directors and bankers debarred from banking profession. Quarterly reporting and public dissemination of financial statements, and credit rating are mandatory for the financial institutions.
Paid up capital requirements have been raised to Rs 1.0 billion and for the risk management, all securities and investments are marked to market continuously, asset back securities has been allowed, and credit information center (CIB) is made on line. 15.2.5 Capital Market Development
For the deepening of capital market, 10-year Pakistan Investment Bonds as the benchmark for corporate bond issues, commercial papers and debt instruments of different tenures have been made available in the country. Further, the incorporation of an independent Securities and Exchange Commission of Pakistan (SECP) in 1997 was an encouraging step in the process of the capital market reforms.
Several steps have been taken for the improvement and modernization of market structure, including the reforms in the corporate debt market through promotion of Term Finance Certificates (TFCs). Through exchange and payment reforms, foreigners and overseas Pakistanis were allowed to make investments without prior permission except few industries. Furthermore, allowing 100 percent equity participation of foreigners in the projects helped increase their confidence. Another step was taken to make a Central Depositary Company (CDC) of Pakistan in 1993 to facilitate electronic transfer of stocks and the operations of this CDC started in 1997. This helped to encourage the market activity and streamlined the settlement process. Similarly the establishment of the Pakistan Credit Rating Agencies Limited (PACRA) and DCR-VIS Credit rating Company Limited was an encouraging step towards market transparency. 15.2.6 Technological Improvements
For the technology up-gradation in the financial sector, Real Time Gross Settlement (RTGS) is underway to improve the payment settlement system infrastructure. And Worldwide Interbank Financial Telecommunication (SWIFT) is operational since June 2000 and it has played an important role in the security and efficiency of the payment system. Moreover, e-clearing
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house, e-commerce, ATM network and on-line and automated branches have been started by various commercial banks. Both the regulators of the financial system, SBP and SECP have been made fully computerized and are equipped with the latest IT technologies of financial sector. Keeping pace with the rising consumer demand, banks are also improving their infrastructure by investing in IT (both on hardware/software and human resource fronts), which is evident from the strong growth in the number of online branches and ATMs in the country. The number of ATMs, which was close to 200 at the end of year 2000, has surpassed 500 as of 31-12-2003, while number of online branches has grown almost 5 times to 1581 during the same period.
In addition to ATMs and credit cards, other modes of e-banking like phone banking and internet banking are also gaining popularity among the banks for providing round-the-clock, uninterrupted service to their customers. Phone banking has been quite popular and is becoming a more widely used mode of delivering off-branch services. Moreover, some banks have recently ventured into providing a full range of secured internet banking to their customers. Another recent development has been interconnectivity of two ATM switches (i.e. 1-link and mnet). Now the customers belonging to banks of one ATM switch can also use ATMs of banks of the other switch and vice versa, adding more convenience in the overall services. 15.2.7 Diversified Commercial Banking
Commercial banks are encouraged and facilitated to develop new products and services such as mortgage financing, SME, rural financial services, consumer loans and micro finance. At the same time, Islamic banking is allowed to run parallel with conventional banking. 15.2.8 Reducing Non-performing Loans (NPLs)
To control the non-performing loans of the banking sector, several steps were taken, the most important being the establishment and working of Corporate Industrial Restructuring Corporation (CIRC) and National Accountability Bureau (NAB) for the settlement of non-performing loans and the action against willful defaults respectively. Periodically the loans’ status is evaluated and the concerned offices of the regulatory body take necessary actions. Although the volume of the NPLs could not be reduced substantially during the process, the growth of these NPLs has slowed which is a healthy sign for the development of the financial sector. Moreover, these measures have contributed in the reduction of public sector share of NPLs to 89.9 percent in 2000 from 95.9 percent in 1991. 15.2.9 Capacity Building
To make the financial matters and procedures compatible with international best practices, SBP and SECP have developed adequate management structure, technical expertise, and technology and enforcement capacity. New and separate prudential regulations are being introduced for corporate, consumer and SME lending, and banking courts have been established for speedy disposal of cases.
To transform itself into a professional, efficient and modern institution, SBP has separated its core and non-core functions, streamlined its recruitment process with greater emphasis on merit at senior and middle management, and strengthened its training department. 15.2.10 Efficiency Indicators of the Reform Process
• Share of public sector in the banking sector assets has reduced to 54 percent in 2000 as compared with 92.2 percent in 1990 (Table 15.1).
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• Broad Money (M2) to GDP ratio as a measure of financial deepening showed a marginal increase on average from 39.2 in 1980s to 43.5 percent during 1990s. This is not a healthy sign in terms of the international and peer group standards (Tables 15.1 & 15.2).
• Substantial improvement in the financial intermediation was seen in terms of a decrease in the currency to deposits ratio (from 51.4 percent in 1990 to 34.3 percent in 2000). However, the position of Pakistan in the peer group countries is still very poor (Table 15.2).
• The share of mandatory and concessionary credit in total private sector credit declined from 44.2 percent in 1990 to 31.4 in 2000.
• Debt management reforms resulted in the reduction of average per annum growth rate of debt level from 20.4 percent in 1980s to 15.7 percent in 1990s. However, due to inconsistency of the reform agenda, the cost of this debt increased and the interest expenditures increased substantially during 1990s.
15.3 STRATEGIC OBJECTIVES
To transform the financial sector into a modern and efficient industry led by the private sector, Pakistan must continue the reform process with particular emphasis on:
• Ensuring autonomy and competence of the regulators and promoting professional management at all levels of decision making in the financial institutions;
• Implementing the privatization process efficiently and prudently;
• Restructuring and strengthening non-banking finance companies to make them an integral part of financial services industries;
• Further enhancing the institutional capacity of the State Bank of Pakistan (the central bank of Pakistan) and, Securities and Exchange Commission of Pakistan (SECP) in becoming effective regulators and supervisor of the financial system;
• Developing a visible addition to customer value through IT;
• Automating the existing manual systems (Banking Operations); developing a local and wide area networks, connecting various departments and offices across the country;
• Designing and implementing a Data Warehouse wherein the data is stored, retrieved, upgraded and extracted for analytical purposes;
• Developing a Management Information System;
• Improving the operational efficiencies leading to customer convenience and cost savings; and
• Pre-emptive measures to face the challenges of the external sector vulnerability and risks involved in the financial liberalization.
15.4 ACTION PLAN
15.4.1 Use of Information Technology
Information Technology is now central to banking all over the world. This is one of the major reasons why new private and multi-national banks have been able to survive, thrive, and
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adapt in an increasingly competitive space. These banks were able to leverage on low-cost channels such as ATMs and Net banking to the optimum levels contributing to reduced operating costs. These channels can be used not only to improve customer service but also to divert traffic from the branches. It is a fact that the cost of transactions over these channels is lower than doing this through the branches.
Banking industry in Pakistan is at the infant stages of adopting new technology. Keeping pace with the rising consumer demand, banks need to improve their infrastructure by investing in IT (both on hardware/software and human resource fronts). Even though banks are adopting new technology fast, there is a big room for improvement.
Deliver banking services through various means of electronic banking (use of electronic communication), like automated teller machines (ATMs), automated loan machines (ALMs), the Internet, the World Wide Web, telephones, stored value cards or other electronic devices. The effect of e-banking will be to augment or facilitate existing banking and payment mechanisms, primarily by making transactions cheaper, faster, secure, and more convenient.
ATM’s and Debit Cards: Most of the banks in Pakistan are offering ATM services. However, still the network of ATM services is very limited. Number of ATM should not be restricted only to branches, but should be extended to markets, universities, hospitals etc. Very few banks provide debit card network. In the most advanced countries in the world each account holder is given a debit card. It eases the payment mechanism in the markets as well as on the net.
Certification and Digital Signature: With such improvements in the technology there is an immense need for information security on the networks. Recently government of India has established the institute for development and research in banking technology as a certification for the digital signatures. Such mechanisms should be introduced in Pakistan as well. For the payments security on the net, software with the complete security are absolutely necessary.
Negotiated Dealing System (NDS): NDS has become essential feature of financial system. NDS enables on-line dealing and dissemination of trade information relating to instruments in the money and foreign exchange market. State bank can authorizes financial institutions that can participate in NDS (usually banks, mutual funds, insurance companies etc).
Strengthening FECs Structure: The structure of Foreign Exchange Companies (FECs) should be strengthened. The documentation and other procedures involved in FECs operations should be updated and streamlined on sound governance principles. This is necessary to reduce the volume of the unauthorized transactions in the kerb market and to wipe out the undocumented market of foreign exchange. Redefining Banks’ Business Priorities: Banks should now focus on cost reduction and Customer-centric services. Reduced costs basically translate to higher profit margins.
The focus is on increasing the profit margins by cutting costs where it matters—on the operations side. It is imperative for them to increase the volumes and reduce the cost of operations. In the financial world, product superiority does not last long as it is relatively easy to copy products. So, the real strength comes from operational excellence and understanding the customer. 15.4.2 Risk Management for e -banking
Though e-banking has opened up a whole new array of opportunities and prospects both for the financial institutions and consumers, like all other business activities it has its own unique risks and threats to deal with. e-banking warrants an enabling legal infrastructure, strong supervisory oversight and most of all, banks’ own set of proper risk management practices. These
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risks need to be recognized, addressed and managed by banking institutions in a prudent manner according to the fundamental characteristics and challenges of e-banking services. 15.4.3 Facilitation and Supervision
The government should facilitate adoption of technology in Pakistan by strengthening the communication infrastructure and by making it available at lower prices. Proper implementation of the Electronic Transaction Ordinance 2002 will allow the creation of a legal framework for recognizing an electronic transaction as acceptable evidence in the judicial system of Pakistan. Similarly, SBP should perform its due supervisory responsibilities to ensure robustness of the financial system through implementation of Real Time Gross Settlement (RTGS) system which is a necessary condition to a flourishing and sound e-banking environment.
The effective system of supervision will have clear responsibilities and objectives for each agency involved in the supervision of financial institutions. The State Bank being the central bank is responsible for regulation and supervision of banks and development finance institutions (DFIs). The Non-bank Financial Institutions fall within the supervisory jurisdiction of the Securities & Exchange Commission of Pakistan (SECP). There is need for a close coordination between SBP & SECP for sharing information and supervisory cooperation. In addition, capacity of the National Accountability Bureau (NAB) should be enhanced to investigate and prosecute any suspicious financial transaction. The coordination between NAB and, SBP and SECP should be effective for investigation into white-collar crimes in financial institutions.
‘Time consistency policy’ is needed where the central bank’s intention to implement policy is not doubtful even in situations where the central bank’s views differ from those of the government. For instance, Ayogu, Emenuga and Soludo (1998) show how uncertainty over the reform process was an important factor that caused financial distress in Nigeria 37. 15.4.4 Capacity Building
Although SBP as well as commercial banks have increased their professional skills and capabilities, training programs should be need based. Before the start of such programs proper evaluation should be made for proper selection of training needs and the persons to be trained. This will save time of the bankers as well as the foreign and local expenditures incurred on these activities.
Capacity building in specified areas is absolutely vital as present level of expertise in risk management at commercial banks needs major up-gradation to conform to the level demanded by Basel II.
The skills of existing staff will need to be upgraded both at banks and at the SBP. Further, realignment of regulatory reporting and IT systems at the SBP with the requirements of data capturing under Basel II will be required.
Similarly use of real time banking needs training and skill development for its effective and appropriate implementation. This will enable users to understand issues involved in the real time banking. In this regard SBP and other banks can join hands to manage training programs at large scale with cost effectiveness and efficiency. This will also reduce the risks and problems faced at the start of such systems/automations. Moreover such projects should be implemented in
37 Ayogu M.D., Emenuga C. and Soludo C.C. (1998), “Nigeria: Country Case Study” in Fanelli J.M. and Medhora R. eds., Financial Reform in Developing Countries, Ottawa: International Development Research Centre
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stages to give the banks/bankers time for adaptability and check for efficacy of the applied system.
Most business organizations today consider the acquisition, organization and analysis of data to be a core requirement in support of their primary strategic goals. For a Central Bank, however, the primary strategic goal is the acquisition, organization and analysis of data. Without this, it would not be possible for a Central Bank to perform its primary function of supporting and regulating a healthy financial environment, conducive to the growth and financial prosperity of its citizens and the country as a whole.
SBP needs to develop a Data Warehouse for a coherent, robust and extensive information system capable of handling and analyzing large quantities of data. An Enterprise Data Warehouse (EDW) is the core tool for achieving this goal. This project should be completed without any delays which are mostly occurred due to lack of understanding and cooperation between the data users (bankers/economists/statisticians) and the programmers for the designing of the EDW. 15.4.5 Deposit Insurance System
Severe episodes of financial instability in recent times have led to widespread adoption of Deposit Insurance System (DIS) in crisis as well as non-crisis countries. With liberalization and privatization, deposits of the banks in private sector, forming almost 80 percent of the total customer deposits, now in principle stand without implied state guarantee that was previously available to the depositors of public sector banks. The State Bank continues to protect the interests of depositors through its supervisory role and it has shown its commitment by successfully resolving a number of bank failures since the inception of the liberalization process. But this protection does not guarantee direct compensation to the depositors in case of any bank failure.
The SBP should consider the institution of a deposit insurance scheme (DIS) in the country. The bank should engage all the stakeholders in a constructive dialogue for devising and implementing a prudent DIS that provides the right kind of incentives and carries minimum downside effect. The most appropriate time for the introduction of a DIS is when the financial sector is sound and free of fragility.
15.4.6 Reducing the Risks attached with External Sector Vulnerability
Apart from current reserves accumulation by SBP, the appropriate strategy to avoid risks would be a combination of measures like limited sterilization, exchange rate flexibility and short-term use of selective capital controls to specifically address causes of capital inflows.
Portfolio flows are more volatile and difficult to intermediate due to short term nature. Despite banking sector reforms, the ability of banks to manage risk is still weak, and this underscores the need for further privatization and operational autonomy.
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Table 15.1: Efficiency Indicators of Financial Sector (percent)
Public Sector share in total banking sector
Years M2/GDP MM CC/TD CC/RD Assets NPLs FY81 37.6 2.5 50.1 50.1 FY82 35.9 2.5 48.1 48.1 FY83 40.1 2.6 45.9 45.9 FY84 38.9 2.6 47.1 47.1 FY85 39 2.6 44.5 44.5 FY86 41 2.7 43.1 43.1 FY87 41.9 2.4 45.5 45.5 FY88 39.9 2.5 48.6 48.6 FY89 37.7 2.4 51.4 51.4 FY90 39.9 2.4 51.4 51.4 92.2 95 FY91 39.3 2.4 52.6 54.6 89.1 95.8 FY92 41.7 2.4 43.3 49.4 83.7 92.6 FY93 44.4 2.8 39.3 46 80.1 94.4 FY94 44.7 2.9 36 43.9 78.4 95.8 FY95 43.8 2.7 35.7 43.2 76.7 94.1 FY96 44.3 3 33.6 42.4 72.3 92.5 FY97 42.9 3.2 30.4 42.2 68.7 91.7 FY98 45.1 3.3 29.4 42.1 70.5 90.9 FY99 43.6 3.2 29.2 33.2 71.8 88.9 FY00 44 2.8 34.3 38.5 54* 72.1*
Averages 1981-85 38.3 2.6 47.1 47.1 1986-90 40.1 2.5 48 48 1991-95 42.8 2.6 41.2 47.4 81.6 94.54 1996-00 44.2 3.1 31.4 39.7 70.825 91
MM = Money Multiplier, CC/TD = Currency in Circulation to Total Deposit Ratio, CC/RD = Currency in Circulation to Rupee Deposit Ratio *: Excluding two privatized banks (MCB and ABL). Source: State Bank of Pakistan (2002), “Pakistan: Financial Sector Assessment 1990-2000”, Karachi.
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Table 15.2: Indicators of Financial Depth and Efficiency (Percent)
Indicators Pakistan India Bangladesh Sri Lanka Philippines Malaysia Turkey Median
1990 Value Country
M2 / GDP* 39.2 42.7 31.8 28.5 34.2 64.4 23.9 34.2 Philippines
Currency / M2 37.6 20.7 12.8 24.1 16.8 14.6 12.1 16.8 Philippines
Currency / GDP 14.7 8.8 4.1 6.9 5.7 9.4 2.9 6.9 Sri Lanka
Money Multiplier 2.2 3 3.9 2.8 2.6 4.2 3.3 3 India
Demand Deposits1 61.3 17.6 17.5 25.4 8.9 21.6 31.1 21.6 Malaysia
Time Deposits1 38.7 82.4 82.5 74.6 91.1 78.4 68.9 78.4 Malaysia
Credit to Government2 48.5 49.4 10.6 41.3 1.7 4.5 1.7 10.6 Bangladesh
Credit to Private Sector2 51.5 50.6 89.4 58.7 98.3 95.5 98.3 89.4 Bangladesh
2000
M2 / GDP 46.5 56.9# 43.3 38.2 62.5 102.6 44.6 46.5 Pakistan
Currency / M2 27.8 17.5 14.2 13 9.3 6.4 5.6 13 Sri Lanka
Currency / GDP 12.9 9.9# 6.2 5 5.8 6.6 2.5 6.2 Bangladesh
Money Multiplier 3.2 4.1 4.6 4.7 4.7 4.1 5.6 4.6 Bangladesh
Demand Deposit1 43.2 14.9 14.5 13.3 10.6 17.4 12 14.5 Bangladesh
Time Deposit 1 56.8 85.1 85.5 86.7 89.4 82.6 88 85.5 Bangladesh
Credit to Government2 41.8 44.5 22.2 27.8 23.4 -2.2 52.7 27.8 Sri Lanka
Credit to Private Sector2 58.2 55.5 77.8 72.2 76.6 102.2 47.3 72.2 Sri Lanka
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BIBLIOGRAPHY D. Ayogu M., Emenuga C. and Soludo C.C. (1998), “Nigeria: Country Case Study” in
Fanelli J.M. and Medhora R. eds., Financial Reform in Developing Countries, Ottawa: International Development Research Centre.
State Bank of Pakistan (2002), “Pakistan: Financial Sector Assessment 1990-2000”, Karachi.
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CHAPTER 16
CONSTRUCTION AND HOUSING SECTOR38
Rehana Siddiqui
The role of construction and housing sector in economic growth of a country is quite significant. The sector has important forward and backward linkages to largest number of sectors like industries producing construction inputs and the use of output, i.e., infrastructure providing the basis for economic growth and improving the quality of life. Housing is a major component of the construction sector, which responds to change in population39, to change in income and availability of other profitable investment options. In Pakistan, the housing demand increased in response to changes in all these factors. However, the supply of housing did not match the rise in demand resulting in supply shortages and rising prices. In this study we discuss the role of science & technology and research and development in quantitative and qualitative improvements in this sector. The suggested action plan includes acquisition of technology for improving the quality of building materials like building stones, cements, steel and others, opening of the department of Architecture at the higher level of education, establishment of a centre for standardization of construction materials, research and development on improvement and commercialization of high quality construction materials; and provision of other facilities and infrastructure.
16.1 INTRODUCTION
The contribution of construction sector in economic growth of a country is quite significant. In Pakistan, the share of construction and housing sector in gross domestic product increased from 9.1 percent in 1995/96 to 11.7 percent in 2002/03. 40 This sector has important forward and backward linkages to largest number of sectors like industries producing construction inputs and the use of output, i.e., infrastructure providing the basis for economic growth and improving the quality of life. The employment elasticity, during 2000/03, was 0.89 showing highest employment generating potential of the sector. The industrial linkages include chemical industry (like paints and varnishes), mining (construction stones, marbles and other ceramic materials), steel industry, electronics industry, cement industry, and trade sector (import and export of construction materials).
Housing, a major component of the construction sector, responds to change in population41, to change in income and availability of other profitable investment options. In Pakistan, the housing demand increased in response to changes in all these factors. However, the supply of housing did not match the rise in demand resulting in supply shortages and rising prices. In Pakistan, according to Pakistan Economic Survey (PES)-2003/04, Pakistan had 19.3 million housing units in 1998 as compared to 12.6 million in 1980. The housing need is estimated to be equal to 24.9 million units in 2004 resulting in shortage of 5.5 million. [see table 16.1].
38 We are grateful to Mrs. S. T. K. Naim for her interest and valuable support for the study. Thanks to the participants of meetings at Pakistan Council for Science and Technology, and Mr Zameer Awan for their useful suggestions and help. 39 Population growth rate and migration affect the size of the population. 40 The share of construction and housing sector in gross domestic product varied over time. The share of construction sector increased from 3.8 percent in 1995/96 to 5.3 percent in 2002/03 and the share of housing sector increased from 5.5 percent in 1995/96 to 6.2 percent in 2002/03. 41 Population growth rate and migration affect the size of the population.
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Table 16.1: Housing Needs in Pakistan
Situation in 1998 (Stock) Annual change Currently Available 19.3 million 300,000 Current Needs (2004) 24.8 million 570,000 Current Shortfall (2004) 5.5 million 270,000
Keeping in view that housing is one of basic necessities of life, the Ministry of Housing
has devised policy for “Hous ing for All” and the government has declared housing construction as priority business. In this chapter we concentrate on “Housing” sector only and examine the role of technology in quantitative and qualitative improvements in this sector. 16.2 PROBLEMS IN THE HOUSING SECTOR
Major problems faced by the sector are:
1) High population growth rate has resulted in rapid increase in demand for housing. The population growth rate during 1980-2000 was greater then 2 percent and growth rate of supply of housing was around 1.9 percent during this period. In urban areas the population growth rate is higher due to in-migration from the rural areas also which increases the burden on limited supply of housing and results in emergence of slums.
2) Limited availability of finances is a critical bottleneck affecting the supply of houses. If the “Housing for All” policy is to be implemented over the next ten years, an annual investment of Rs. 200 billion to 300 billion would be required. A substantial proportion of the required funds would be given as loans. Unfortunately only Rs 3-4 billion have been available. The availability has increased during the current year but it is still below the requirements. This is significantly lower then 10-15 percent of GDP in other developing countries. [See Government of Pakistan-2003/04].42
3) Distortions in the land market due to unregulated working of the housing societies, ambiguity in property rights, tax laws, lack of implementation of property laws, and red tape are affecting the efficiency of land market. All these factors with lack of consumer protection laws have also contributed to the escalation in prices of real estate in major cities of Pakistan.
4) Lack of standards and limited enforcement of existing materials standard coupled with inefficient design manufacturing has affected the quality of construction.
5) Labour productivity is low due to concentration of unskilled labour, lower quality of inputs to work with and lack of training facilities.
16.3 ACTION PLAN FOR THE HOUSING SECTOR
Following steps can help in promoting growth in housing and construction sectors.
1) Population control will have a multi dimensional impact on economic growth including the reduction in pressure on housing sector and reduce price escalation.
2) Government of Pakistan has taken a number of steps to increase the availability of finances: i) The commercial banks’ exposure to housing finance has been increased from 5.0
percent to 10 percent of net advances
42 Government of Pakistan (2004): Pakistan Economic Survey-2003/04.
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ii) Maximum loan limit has been increased from Rs. 5 million to 10 million. Similarly the debt-equity ratio has been increased
iii) Maximum loan limit on HBFC has been increased to Rs. 50 million from Rs. 20 million
iv) Banks and DFIs are allowed to extend credit for BMR of Machinery used in housing and construction sector
v) HBFC and other financial institutions are also encouraged to formulate packages for the low income groups
3) In order to reduce distortions in the land market, following steps are critical: i) Ownership rights need to be defined clearly ii) The workings of the hous ing societies must be regulated iii) Enforcement of tax laws and other standards must be ensured (with clearly
defined and implemented property rights, the availability and effectiveness of the available finances will increase)
iv) Reduction in red-tape v) Transparency in the procedures for the disposal of government land vi) Statutory and coordinating requirements should be identified to ensure a better
governance, and vii) Formulation and implementation of laws for consumer protection
17.5.� ROLE OF SCIENCE AND TECHNOLOGY
1) Technology can play important role in improving the quality and standards of construction materials and labour productivity. Following measures can help to enhance the role of technology in growth of construction (housing) sectors. i) Improvement in the quality of existing materials ii) Research and development for standardization and development of new
construction materials iii) Provision of housing related infrastructure
The action plan corresponding to each measure is given in the tables below. Table 16.2 suggests acquisition of technology to improve the quality of materials. This can help to reduce dependence on imported construction materials like ceramic tiles, pipes and other construction materials. According to Taqvi, et.al. (2000), substitution of local improved material can reduce dependence on imported materials by 50 percent.43 However, for this purpose acquisition of technology and opening up facilities for research and development are critical.
Table 16.2: Improvements in Materials Actions Needed Agency Time Expected Cost Expected Benefits Acquisition of Technology and R & D for building stones (e.g., marble)
Ministry of Housing and Works/MoST (PCSIR)
5-years Rs. 250 million Increase in quality of construction and rise in export earnings
Opening of Depart ment of Architecture
HEC 5-years Rs. 500 million Improve the the design and quality of housing
43 Taqvi, N. H (Engr.), Engr. A. Maher, Engr. R. Rahooja and A. B. Mangi (2000), Sustenance and Self Sufficiency in the Construction Industry through Research and Development, presented at 1st International Civil Engineering Congress, 16-17 September, 2000, IEP Karachi.
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In addition to improvements in materials, use of standardized material in construction can help to reduce quality differential across construction sites and cities. This will help to reduce also price differentials across cities. The Council for Works and Housing Research has developed a number process, viz., Masonry Slag Cement, Rice Husk Ash Cement, and Lime-Surkhi Cement. The institute has developed materials for roofing, flooring, plasters, door and windows and other housing accessories (water tanks and other).[see Taqvi, et. Al. (2000)]. Given the expertise a Centre for Standardization of Construction Materials can be opened at CWHR. The CWHR can collaborate with MoST for efficient utilization of expertise available in the country.
Table 16.3: Standardization of Materials Actions Needed Agency Time Expected Cost Expected Benefits Center for Standardization of Construction Material
CWHR 5-years Rs. 350 million It will limit the quality differentials in the material cost of houses.
R & D on improvements and commercialization new construction materials
CWHR, MoST/ HEC
7-10 years Rs. 450 million Reduction in cost of construction.
Standardization of material can limit the quality differentials in the material cost of houses, ensuring the price comparisons. This will also encourage the emphasis on improvements in the labour productivity not on cutting the material cost. Currently all players in the production chain, particularly the developers and contractors, focus on access to land, not on cutting the material cost or on improving the efficiency of worker. With standardized material and removal in the land market distortions, the focus will be on improvements in labour productivity and consumer protection.
In order to reduce the pressure on existing housing stock, construction of new houses is encouraged. This has resulted in emergence of various housing societies. In addition to governance issues, the housing societies ignore a critical question of availability of infrastructure. The role of government is critical in this regards. The developers of the housing schemes should explicitly address the following issues before the approval of the government.
a) What is the expected size of the housing society in terms of coverage of population, number of households, plot size, etc.?
b) Is there a road link? If not, what type of road would be required? What would be the cost?
c) Is there water? If not, what could be the possible source of water? What will be the cost of providing water of good quality to the residents?
d) Is electricity available? If not, what will be cost of providing it? e) Are sewerage facilities available? If not, how much resources will be required to provide
these facilities? f) What type of water treatment facilities are available to ensure delivery of good quality
water to the community? g) How many households can be accommodated in a particular community? h) What type of facilities like schools, colleges and hospitals will be provided? i) What will be the cost of constructing a house? j) What type of financial plans are available to the community?
All these are fundamental questions, which should be addressed before implementing a housing scheme. Therefore following action plan is suggested for provision of basis infrastructure. [see Table 16.4].
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Table 16.4: Infrastructure Actions Needed Agency Time Expected Cost Expected Benefits Availability of resources for infrastructure like sewage, gas, electricity and others
Ministry of Housing and Works and other relevant instution
5-years Rs. 350/- million Reduce the pressure on existing urban centers and ensure the expansion of houses in suburbs
Efforts to improve the productivity of cement, steel, chemicals and other industries
Various Ministeries
5-years Continuous process
Higher Industrial growth. Employment generation
Following additional actions can be effective in improving the quality of the construction.
a) Efforts to improve ductility of high strength concrete for use in multi storied buildings, bridges and others.
b) Development of new beneficiation technologies for the separation of high quality minerals like lime stone and coal.
c) Research on special curing compounds and corrosion inhibitors. d) Research for development of wood substitutes.
16. 5 HOUSING FOR POOR
Lastly, the rise poverty has raised critical issues regarding the availability of housing for the poor, emergence of slums in major cities putting excess pressure on the existing infrastructure affecting the quality of life. Government intervention is needed to develop demand side programs to increase access to housing services, particularly among the poor. Housing assistance programs in this context can help to build asset ownership of the poor. It can also support economic development by helping poor to set up home-based business and encouraging community development.
Government can introduce two types of financial support services to achieve the objective of “Housing for All”. First capital grants can be provided and second is allowances. These subsidies can be provided directly to the poor households. Capital grant can be a one time subsidy that can be used to build, buy, or repair the house. Currently, the House Building Finance Corporation provides capital only to those who want to build house not for repair and maintenance or to buy land for house construction. The Corporation can be encouraged to extend its coverage to these activities and a fixed share should be available to the poor households. However, the access to the poor can be improved with a proper targeting mechanism is in place.
In some developing countries Housing allowance is provided, particularly to the poor, for house related expenses. However, this subsidy is provided on cost sharing basis (private-public sharing). This type of subsidies are provided in the centrally planned economies as part of social safety nets. In developing countries with weak institutional capabilities and tight housing markets provision of allowances may not be a good solution. The provision of capital grants may be better as it can be relatively easy to start and maintain.
The housing policy should concentrate on supply of affordable housing to meet the growing demand, particularly in urban areas, it should not exclude poor. Policies related to slums will have direct impact on poor. For example, in China, as part of the new housing policy for the poor, the government has set up maximum level of housing for the poor in the urban areas, up to 60 percent (of local average) subsidy for housing area. In the next step housing assistance for the urban and rural residents will be provided. Pakistan can also adopt this policy framework to control the distortions in the housing market and ensure Housing for All, including the poor.
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The development of ferro cement for low cost and mass housing can reduce the construction cost substantially. This is a low cost technology and it is developed and used in other countries. Pakistan can import the technology and commercial production of the material can be useful for achieving the objective of Housing for All. 17.5.� CONCLUSIONS
The role of construction and housing sector in economic growth of a country is quite significant. The sector has important forward and backward linkages to largest number of sectors like industries producing construction inputs and the use of output, i.e., infrastructure providing the basis for economic growth and improving the quality of life. Housing is a major component of the construction sector, which responds to change in population44, to change in income and availability of other profitable investment options. In Pakistan, the housing demand increased in response to changes in all these factors. However, the supply of housing did not match the rise in demand resulting in supply shortages and rising prices. Keeping in view that housing is one of basic necessities of life, the Ministry of Housing has devised policy for “Housing for All” and the government has declared housing construction as priority business. In this study we discuss the role of science & technology and research and development in quantitative and qualitative improvements in this sector. The suggested action plan includes:
1. Acquisition of technology for improving the quality of building materia ls like building stones, cements, steel and others
2. Opening the department of Architecture at the higher level of education 3. Centre for standardization of construction materials 4. Research and development on improvement and commercialization of high quality
construction materials; and 5. Ensure provision of other facilities and infrastructure
44 Population growth rate and migration affect the size of the population.
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BIBLIOGRAPHY Government of Pakistan (2004), Pakistan Economic Survey-2003/04, Ministry of
Finance, Islamabad. Taqvi, N. H. (Engr.), A. Maher (Engr.), R. Rahooja and A. B. Mangi, (2000), Sustenance
and Self Sufficiency in the Construction Industry Through Research and Development, paper presented at First International Civil Engineering Congress IEP Karachi, held on September 16-17, 2000 in Karachi, Pakistan.
TIFAC (1996), “Materials and Processing: Technology Vision 2020”, Technology
Information, Forecasting and Assessment Council, Department of Science and Technology, New Delhi, (September).
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Annexure 16.1
PSDP Financial Allocation for Construction (Rs. in Million)
Period Total S&T HRD/ Skill
2005-06 228 130 98
2006-07 288 150 138
2007-08 360 170 190
2008-09 457 180 277
2009-10 614 200 414
Total 1948 830 1118
2010-11 715 230 485
2011-12 776 250 526
2012-13 824 300 524
2013-14 927 300 627
2014-15 1015 330 685
Total 4256 1410 2846
2015-16 1074 390 684
2016-17 1176 450 726
2017-18 1240 520 720
2018-19 1306 590 716
2019-20 1404 600 804 Total 6201 2550 3651
Note: The figures for 2005-06 to 2009-10 may not exactly be equal to the total cost of the projects because of throw forward.
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CHAPTER 17
TRANSPORT SECTOR
Zafar Mueen Nasir
Good quality transport sector is rather important in the development of a country as it helps in trade enhancement, tourism development, foreign investment, and consequential economic growth. The share of transport sector in Pakistan’s GDP is 11.1 percent and it provides employment to 5.9 percent of the labor force. The major issues of the transport sector include inadequate physical capacity, poor maintenance system, wrongly targeted priorities of investment, operational and financial inefficiencies of the public investment, and lack of private sector participation. The rational allocation of inland freight traffic between rail and road network, privatization of railway’s operation in selected sections and inclusion of private sector in development of roads, airlines, ports and shipping, and inland navigation can help in improvement of the efficiency of the sector.
The road network in Pakistan is expanding at much faster pace compared to other modes of transportation. The construction of some important road transport projects including motorways and national highways are underway along with the improvement of the existing road network. Major issues of this sector include insufficient road network, deterioration of road infrastructure, overloading, road safety and air pollution. For safe and efficient road network, modernized maintenance system, financing of roads through tolls, and improvement in road construction technology along with human resource development is needed. Improvement in highway safety, encouragement of private investment, controlling of road deterioration are some other important steps.
Urban transportation service and infrastructure have not kept pace with the growing demands of the urbanization. Urban areas are plagued with slow traffic and congestion, frequent accidents, air pollution, and high vehicle costs due to poor road conditions. The goal is to develop a good transport system to provide fast, reliable, comfortable, safe and affordable services to urban residents. To achieve this goal, main strategy is to develop an integrated mass transport system through proper investments, capacity improvement, institutional strengthening and building public-private partnerships.
The share of railways in public investment to the transportation sector has drastically declined mainly due to over aging of the assets, long delays in arrival and departure, frequent accidents, lack of locomotives, and insufficient train speeds. The major goal is to revitalize the railway and make it choice of the commuter and freight haulers through service friendly environment. The public sector investment may be used for strengthening of transport capacity through improvement of facilities including doubling tracks, electrification, rehabilitation of tracks, revamping of signaling, and repair of bridges.
Pakistan International Airlines along with three private carriers are operational in Pakistan. The main issue in the air transportation is the poor quality of the services and airport facilities. The goal is to improve the service standard to passengers by private sector participation in airlines industry. Besides, PIA’s operation efficiency needs to be improved including cost control, reduction of manpower-aircraft ratio, aircraft renewal and higher rate of aircraft utilization. The total volume of cargo handling at the seaports has increased by 57% during the last decade. Major issues include the inefficiency of the trade and transport logistics
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system including customs clearance, port handling operations, lack of Investment, high handling cost, and private sector involvement. The strategy is to modernize the port facilities at the Karachi and Qasim ports by containerization of traffic on BOT/BOO arrangement with the help of dry ports and bonded warehouses. Gwadar port for development of the western part of Pakistan and regional trade would be effective if it is connected through road system.
17.5.� INTRODUCTION
The transport system has direct and indirect linkage with all the important sectors of the economy and influence economic and social development of a country. An efficient and good quality transport system contributes to economic growth by lowering domestic production cost through timely delivery of raw materials, enhancing economies of scale in the production processes and creating economic opportunities and communication among the people. The transport system helps in in tegrating markets, strengthening competition, and increasing access to improved farming techniques. The role of transportation in trade enhancement, tourism development, foreign investment, and consequential economic growth is widely accepted. The transport sector generates large number of employment opportunities for people and many economic activities depend upon this sector. The sector contributes 11.1 percent to GDP, provides employment to 5.9 percent of labour force, and its share in the investment is 12.5 percent.
The rational allocation of inland freight traffic between rail and road network, privatization of railway’s operation in selected sections and inclusion of private sector in development of roads, airlines, ports and shipping, and inland navigation can help in improvement of the efficiency of the sector.
Table 17.1: Summary of Transportation Statistics Unit 1970/71 1980/81 1990/91 2000/01 2003-04 Road Length Km 32,508 96,436 170,823 249,972 255,856 Vehicles on Road 000 210.7 755.7 2,095.5 4,464.7 4973.6 Railway Route Km 8,566 8,817 8,775 7,791 7,791 Passenger 000 12600 16,387 84,900 68,800 52,900 Freight M.T.K 7,458 7,918 5,709 4,520 3,348 Locomotives Number 1,141 960 753 610 592 Ports Handling at Karachi and Qasim
000 tons 9,588 14,654 18,709 28,981 20,500
Vessels Number 71 50 28 14 14 Air Route (PIA) 000 90,555 205,996 255,336 324,815 294,098 Domestic Freight (PIA)
M.T.K 486 1,549 2,045 4,096 1,890
Planes (PIA) Number 28 31 44 46 47 (Note) M.P.K is million passenger km. M.T.K is million ton km. Source: Finance Division. (2002) “Economic Survey 2003-04” Federal Bureau of Statistics, (2003) “Pakistan Statistical Year Book 2002”
17.2 MAJOR ISSUES Relatively higher transportation cost in Pakistan has severely constrained the economic growth, competitiveness of Pakistan’s exports, and improvement of people’s life. A study by World Bank estimates a loss of Rs.220 billion or 6% of GDP due to the inadequacies of the transportation system.
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The major issues of the transport sector are
1. Inadequate physical capacity
2. Inadequate maintenance system
3. Poorly targeted priorities of investment
4. Operational and financial inefficiencies of the public investment
5. Lack of private sector participation and
6. Environmental impact 17.5.2 Road Transportation
The road density, an important indicator of economic development, is low (0.32 km per sq km) in Pakistan as compared to neighboring countries such as India (0.49 km per km) and Sri Lanka (0.48 km per km). Punjab and Sindh have high and Balochistan has density of only 0.12 km per sq km (see Table 17.2). Road per population and road per vehicles point to a different story. Balochistan is the highest and Punjab is the lowest in both indicators.
Table 17.2: Road Length and Density Pakistan Punjab Sindh NWFP Balochistan Total Length (km) 255,856 99,668 77,294 29,093 40,849 High 157,975 76,835 51,489 12,378 3,950 Low 97,881 22,833 25,805 16,715 36,899 Percentage of High Type 61.74% 77% 67% 43% 10% Area (km) 803,943 206,250 140,741 104,741 347,190 Road Density (km/km) 0.32 0.48 0.55 0.28 0.12 Population (million) 131.70 72.58 29.99 20.6 6.51 Vehicle Registered 4,700,896 2,760,856 1,377,004 406,831 156,205 Road Per Thousand Vehicles 55 36 56 72 262
(Source) Halrow. (2003) “JBIC Sector Study for Transportation Sector Federal Bureau of Statistics. (2003) “Pakistan Statistical Year Book 2003”
The road network in Pakistan is expanding at much faster pace compared to other modes
of transportation, road networks registered 47% increase in the last ten years. Along with the construction of new roads, a sizeable portion of the low type roads was also converted to the high type roads under the Khushal Pakistan Program. The road network is managed by different government departments. The NHA manages approximately 9112 Km, Provincial Government departments’ manage 101,151 Km, Local Government, Municipal and Cantonments manage 93,823 Km and 53,920 Km roads respectively. The construction of some important road transport projects inc luding motorways and national highways is underway along with the improvement of the existing road network.45
17.5.2.0.�.�. .� ? ? ? ? ? ? Issues in Road Transportation
Insufficient Road Network: The current road network is insufficient to cater the needs of the growing population of the country. Pakistan needs at least another 100,000 km network of roads to increase the road density to be at par with India and other countries of the region. Due to insufficiency of roads, 30-35 % of perishable harvest is lost annually.
Deterioration of Road Infrastructure: The assessment of the roads done by a joint study of NHA and World Bank (2000) indicated that 47% of national highways were in very poor
45 For the detail of the projects, please see annexure 1.
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1
condition and only 28% of the network was in good condition. The major causes of the deterioration of the road network included (a) rapidly increasing traffic volumes partly due to shift from rail to road, (b) inadequate funds for maintenance, (e) inefficient government institutions, (d) overloading, and (e) lack of private sector involvement.
Overloading: Overloading is a major cause of road deterioration. A surveys by National Transport Research Center concluded that 88% of all trucks exceed the axle load limit of 8 tons and 43% exceed the newly proposed federal load limit of 12 tons per axle. A number of weigh stations were installed to check the overloading but there is a need to do more.
Private Sector Involvement: The inclusion of private sector in the road development was not very successful in spite of policy framework and package of incentives. Private sector can be involved in many ways including toll operations and maintenance contracts.
Inadequate Funding for Maintenance: Due to insufficient funds allocation, proper maintenance of road networks is not taking place and causing deterioration of the roads networks. A study by ADB estimated that in Punjab the budget allocation of road maintenance was merely 19% of the total requirement of Rs.8 billion.
Institutional Deficiencies of Road Agencies: The government departments involved in the maintenance of roads are infested with large number of problems. The system is characterized with slow and centralized decision-making in contract management, low salary, lack of management staff in comparison with engineers, poor financial management, lack of professional management, lengthy judicial process in settling disputes, and delay of the audit process
Devolution: With the establishment of district governments, district and municipal roads were transferred to district (city) governments under the devolution program. 1 The devolution plan envisaged people’s participation in decision-making, demand responsiveness and cost recovery. The system is not yet conducive for such an involvement. In practice, works and services departments under district (city) government do not function, because required rules and regulations have not been established yet.
Road Safety: Pakistani roads are not considered safe for passengers and the fatality rate is substantially higher than other countries in Southeast Asia (50 to 150), and Japan (17). The government collected statistics (which is usually underreported) indicates 10,925 accidents in year 2001-02 which resulted into 5,421 deaths, and 12,942 injuries. Frequent road accidents are caused by higher speed, lack of road safety measures, driver’s ignorance of traffic regulations, lack of enforcement, and poor road and vehicle conditions. Certain efforts were made under World Bank and ADB assistance but not enough particularly at the provincial level. 2
Air Pollution: Although Pakistan has established Environmental Protection Agency (EPA) to enforce international-standard Environmental Protection Act regulating air pollution but the enforcement is totally lacking by EPA. A study by National Conservation Strategy (1992) indicated that an average Pakistani vehicle emits 25 times as much carbon dioxide, 20 times as much hydrocarbon, and 3.5 times as much nitrous oxide as the average US vehicle.
1 For example, in Punjab, the government transferred 79% of the provincial road network with 11,000 staff to district governments, retaining 21% of the network with 10,000 staff. 2 Some of these steps include the establishment and strengthening of highway police, creation of driving instructor training school, supply road safety equipment, and Accident Reporting Center, Driving Instructor Training School and Accident Evaluation Laboratory. During the last two years, all the provinces have initiated safety improvement programs including strictness in licensing, computerization of vehicle registration, and establishment of drive and instructor training schools.
2
17.5.2.? .�.�. .� ? ? ? ? ? ? Strategies
For safe and efficient road network required for efficient production and service delivery, following strategy is proposed:
• Modernized maintenance system: The current system is inadequate and needs overhauling and revamping.
• Introduction of User charges: Financing of roads through tolls and auction of the franchises for services is very important to build and maintain good road infrastructure.
• Develop a modern road construction industry and to improve road construction technology:
• Human Resource Development: HRD is essential in increasing the efficiency of the transport sector. There is a need to train the staff in financial management, road management standard and systems and audit process.
• Improvement of highway safety: Improving Pakistan’s poor road safety records needs the major institutional strengthening of the road safety bodies, national-scale road safety campaign, training or elimination of poor drivers, and target setting and monitoring.
• Encouragement of private investment: An incentive system needs to devise to encourage private sector to participate in the important road projects. And
• To control road deterioration, checking of overloading vehicles through installation of weigh bridges and penalty to defaulters is important.
• In new projects, priority be given to the intercity and rural access roads.
17.5.2.0.�.�. .� ? ? ? ? ? ? Urban Transportation
With the growth of urban population, transportation needs are growing fast in the urban centers. The private sector dominates in providing transport services which are administrated and regulated by the Provincial Transport Departments, Provincial Transport Authorities, and Regional Transport Authorities.3 After the devolution in 2001, city/district government is responsible for urban transportation at the local level. The system is inadequate to cater the needs of the urban dwellers.
Major Issues of Urban Transportation: It is observed that urban transportation service and infrastructure have not kept pace with the growing demands of the urbanization. Because of the ill management, the urban areas are plagued with:
• slow traffic and congestion • frequent accidents • air pollution, and • high vehicle costs due to poor road conditions
The causes for these problems are:
• Drastic increase in the number of vehicles • Inefficient, overcrowded, unreliable public transport service • Lack of quality standard of services
3 The registration of cargo and passenger transport, route selection and fare structure of passenger transport are being done by government authorities.
1
• Road Side encroachment • Poor alignment and insufficient and inconsistent road width • Lack of investment for maintenance and up-gradation of facilities such as traffic
signal, road, sidewalk, intersections, parking space, and drain against urban expansion and traffic growth
• Poor capacity of regulation agencies in such areas as overlapping functions, centralized decision-making, complicated procedures, lack of responsibility and accountability, and poor financial resources
• Poor traffic regulation
Goals and Strategy: The major goal is to develop a good urban transport system to provide fast, reliable, comfortable, safe and affordable services to urban residents. To achieve this goal, main strategy is to develop an integrated mass transport system through proper investments, capacity improvement, institutional strengthening and building public-private partnerships.
Revitalization of Karachi Circular Railway: The Karachi Circular Railway was originally put into operation in 1964 as a part of Pakistan Railway system, but ceased operations in 2000 due to deterioration of facilities and services. Government can restart the project with the public private partnership.
Lahore Light Rail Transit System: The light rail transit system was conceived by the government in 1991 but never been initiated. The time has come to implement such a project to keep pace with the growing needs of the city. A 45 km project can haul major chunk of commuters from Shadara to New Airport. 17.5.� RAILWAY TRANSPORTATION
Railway transport is the most economical mode for mass haulage over longer distances compared to road transportation. In spite of its potential for large logistics cost saving, environmental alleviation, energy conservation, promptness, comfort, and enhanced industrial competitiveness, the share of railway in both passenger hauling and freight traffic has declined substantially. Pakistan Railways, is the largest loss-making public institution. The break down of the expenditure on railway shows that the major share goes to repair and maintenance (41.8%) due to the over aging of the assets.
In the recent years, a number of steps were taken by the administration to reduce the cost and increase the earnings of the railway for its survival. In this regard, staff was right sized, ghost pensioners were eliminated, corrupt employees were retrenched and assets were rehabilitated. Moreover, non-core operations were privatized to improve the service standards. To improve customer services: a number of initiatives were taken. These include the introduction of non-stop trains between main cities, special trains for festival, cleanliness inside trains, punctuality, upgraded computerized reservation, elimination of black ticket marketing, establishment of container terminals, and improvement of dry ports. With these measures the financial performance of the railway is now improving and it is expected that it will come out of woods very soon. There are however some issues which need attention.
2
17.5.2 Major Issues of Railway Transportation
The share of railways in public investment to the transportation sector drastically declined over the years which resulted into over aging of the assets. Presently about 60% of infrastructure and rolling stock, 57% of track, 54% of sleepers, 58% of locomotives, 59% of passenger and goods bogies, 60% of bridges and signalizing system are overage, and telecommunication system has outlived their economic life.
Nonscheduled operations and long delays in arrival and departure, frequent accidents (around 120 annually in the early 90s), lack of locomotives, and insufficient train speeds are contrary to the role envisaged for railway. The poor performance of Pakistan Railways may be due to a number of factors including:
• Lack of autonomy in handling its operation, fare structure and purchases; • Inappropriate organization structure and manpower structure; • Poor personnel management such as overstaffing, lack of training, and rampant
corruption; • Absence of research and development effort; • Poor asset management and burden of running industrial units and ancillary
business; and • Weak efforts for cost recovery including low priority to freight services and fare
structure not commensurate with increase in costs.
17.5.2 Goals and Strategies The major goal is to revitalize the railway and make it choice of the commuter and freight
haulers through service friendly environment. Moreover develop Pakistan as transport hub for trade between Central Asian States, Near East and Indian market. The public sector investment may be used for
• Strengthening of transport capacity through improvement of facilities including doubling tracks, electrification, rehabilitation of tracks, revamping of signaling, and repair of bridges,
• Strengthening transport capacity through quantitative and qualitative improvement of rolling stock,
• Improvement of speed and frequency, and • Modernization of information and communication system.
The key to the resource generation is the improvement and maximum utilization of inherent capacity through better management and operational techniques, clearance of backlog of replacement, renewal of assets, allocation of long-haul freight traffic, rationalization of maintenance budget, and Private sector participation.
17.4 AIR TRANSPORTATION
Currently 43 airports are operative in Pakistan including 10 airports equipped for international traffic and 16 feeder airports. Civil Aviation Authority, established under Ministry of Defense in 1982, operates all the airports in Pakistan, of which 15 airports are under joint operation between CAA and Pakistan Air Force (PAF). Pakistan International Airlines, but more than three private carriers are also operational. Whereas the number of passenger in domestic and
3
international flights has increased by 27% during the last decade, the share of air transportation is merely 10% of passenger traffic and negligible in freight. 17.4.1 Major Issues of the Air Transport
The main issue in the air transportation is the poor quality of the services and airport facilities. The service level is not international standard which is the hurdle in developing tourism industry of the country. The capacity at Karachi and Lahore airports has increased but Islamabad is still low. The car parking facilities and aircraft parking stands need attention.
17.4.2 Goals and Strategies The goal is to provide international standard of services to passengers by improving
private sector participation in airlines industry. Besides, PIA’s operation efficiency should be improved including cost control, reduction of manpower-aircraft ratio, aircraft renewal and higher rate of aircraft utilization. Construction, modernization and repairing of airports are to be undertaken both through private sector and CAA’s own resources.
17.5 MARINE AND INLAND WATER TRANSPORTATION
Pakistan’s two major seaports, Karachi Port and Port Qasim handle all the trade through sea. The total volume of cargo handling at the seaports has increased by 57% during the last decade. During the 1960s, shipping industry was flourishing in the private and government sector, but it languished with its nationalization in the 1970s and Pakistan National Shipping Corporation, a national flag carrier, has only 5% of share in the trade. Inland water transportation has never been significant in Pakistan. Most of the river transportation is used to ferry passengers across the rivers. Pakistan sees little potential for inland water transportation because of dams and barrages without navigation locks on major rivers and decrease in the river flow during the dry season. 17.5.1 Major Issues of the Marine Transport
17.5.1.1 Trade and Transport Logistics System
Inefficiency of the trade and transport logistics system including customs clearance, port handling operations, and commercial trade and transport procedure puts additional cost by 20% compared with modernized system introduced in developed countries according to 1996 Pakistan Logistics Cost Studies. In addition, outdated port and customs facilities and procedures and general trade, insurance and banking regulations prevent a smooth transition between the inland transport corridor and ocean shipping.
17.5.1.2 Lack of Investment
Investment is lacking for upgrading infrastructure to international standards. The berth capacity of the ports is considered adequate for the next many years, but the approach channels need improvement and container handling facilities are insufficient.
17.5.1.3 High Handling Cost
The main institutional problem is the excessive handling charges and low labor productivity. Karachi port is reportedly 1.5 times more expensive than Bombay, 4.5 times Colombo, and 19 times Dubai. High explicit and implicit port and cargo handling cost is caused by lack of coordination, inadequate infrastructure, and cumbersome and complex procedures. Waiting time and morning time of dry bulk carriers is unacceptably high due to the lack of berthing facilities and low productivity. Port Authority lacks of autonomy, asking for consultation with Ministry of Finance, CBR, and Ministry of Communications. There is serious lack of coordination, but competition
4
between the two ports. Efficient utilization of facilities is a must at the Karachi port, especially due to limited space at the Karachi port.
17.5.1.4 Private Sector Involvement
There is no tangible progress on adoption of a landlord port policy for Karachi port and there are ambiguity and lack of clarity in policy framework for private sector involvement.
17.5.1.5 Development of Shipping Industry
The share of entire Pakistan merchant fleet including PNSC is barely 8%, which is much lower than 40% share allowed under UNCTAD Code of Conduct. Private sector partnership is not good enough because of poor investment climate in general, lack of level-playing field with PNSC enjoying the first right of refusal for government cargoes in spite of its poor performance. Application and processing of documents is slow in Port and Shipping Wing of Ministry of Communications.
17.5.2 Goals and Strategies
Modernize the port facilities at the Karachi and Qasim ports by containerization of traffic on BOT/BOO arrangement with the help of dry ports and bonded warehouses. All investments are either through self-finance or private sector. Gwadar port for development of the western part of Pakistan and regional trade would be effective if it is connected through road system. Implementation of the Shipping Act and Shipping Policy approved by the Government and increase in PNSC/private sector fleet enabling it to carry PNSC share of seaborne trade which at present is at 8% against 40% share allowed by UNCTAD formula are strategies for the shipping sector.
5
Annexure 17.1
DIFFERENT ROAD PROJECTS
A network of Motorways is planned to connect the north-south corridor through the integrated Motorway network. Two sections of the motorway i.e. M2 (Islamabad-Lahore) and M-3 (Faisalabad-Pindi Bhattian) are operational and work on M1 (Peshawar-Islamabad) is underway. The work on Faisalabad-Multan Motorway will commence soon. After the completion of this section, Multan-D. G. Khan-Karachi and Ratodero-Gwadar Motorway will be constructed. The Ten Year Perspective Plan includes the construction of M-4 (Faisalabad-Multan) and M-9 (Karachi-Hyderabad) motorways. In the mean time, the Indus Highway will be converted into an access-controlled facility and will form part of the Motorway. A rehabilitation and resurface of 2700 km of road network having high traffic volume is also underway. Another priority road project related with Gwardar port is also underway which connects Makran Coastal Highway (N-10) to Gwardar to Karachi (Liyari) and expected to be complete in December 2005. A highway providing main link between Punjab and Balochistan, (N-70 from Multan through D. G. Khan to Qila Saifullah) will be widened and strengthened with the cost of Rs. 2.843 billion. Improvement works for N-65 (Sukkur-Sibbi-Quetta) and N-25 (Karachi-Quetta-Chamman) are underway. Along with the improvement of Karakorum Highway (N-35) and Mansehra-Chilas (N-15) road, the work is in progress on Islamabad-Muzaffarabad (AJK) Road (N-75).
6
REHABILITATION OF RAILWAY
The Government has recently approved a rehabilitation plan for 5 years (2001/02-05/06) as a part of 10-year perspective plan, for which Rs. 105 billion is allocated.
Motive Power. Procurement of 69 diesel engine locomotives (Rs. 8,830 million) is being implemented under Chinese assistance. Other projects included in Ten Year Perspective Plan consist of procurement of 100 diesel engine locomotives (Rs. 20,670 million), rehabilitation of 36 diesel engine locomotives (Rs. 4,570 million), rehabilitation of 100 diesel engine locomotives (Rs. 10,000 million), and replacement of 29 electric locomotives (Rs. 3,386 million). Rolling Stock. 175 passenger coaches are being procured under Chinese assistance (Rs. 3,168 million). Ten Year Perspective Plan also includes procurement of 400 passenger coaches (Rs. 15,000 million), rehabilitationof 450 passenger coaches (Rs. 1,200 million), procurement of 300 high capacity wagons (Rs. 1,996 million), and procurement of 1,300 high capacity wagons (Rs. 6,150 million). Ten Year Perspective Plan comprises track rehabilitation (Rs. 10,590 million), electrification for Khanewal-Rohri section (Rs. 4,000 million), track doubling for Lodhran-Multan-Khanewal section (Rs. 3,680 million) and Khanewal-Shahdara-Rawalpindi-Peshawar section (Rs. 12,000 million), and telecom/signaling (Rs. 5,000 million).
In addition to physical investment, the Railways intends to carry out (i) expenditure
control through closing unremunerative lines, rationalization of staff, cancellation of trains (ii) revenue increase through a flexible policy for rates and fares, freight and fare rates indexed with increase in HSD prices and salaries and varied according to the commodity type and direction, (iii) conversion of locomotive factories, sleeper factories, carriage factories and other large manufacturing units into autonomous corporations and their subsequent privatization, (iv) realization of efficient traffic through priority to remunerative goods traffic over passenger traffic, corporation with NLC in complement to facilitate and economize on the inter-modal movement of goods traffic, increase in the speed of training (160 km/hr for passengers and 80-90 km/hr for freight trains), and (v) private sector participation by adoption of open access policy, establishment of Railway Regularity Authority for handling private rail operators, and encouragement of establishment of railway transport companies.
7
Annexure 17.2 PSDP Financial Allocations (Rs. in Million)
Period Agriculture
Textile
Leather
Materials1
S&T HRD/ Skill Total S&T
HRD/ Skill Total S&T
HRD/ Skill Total S&T
HRD/ Skill Total
2005-06 4,146 3,871 8,017 825 630 1,455 195 54 249 900 357 1,257
2006-07 6,047 5,778 11,825 886 949 1,835 210 80 290 900 563 1,463
2007-08 7,877 8,632 16,509 958 1,416 2,374 225 119 344 900 908 1,808
2008-09 9,746 12,908 22,654 1,035 2,132 3,167 242 179 421 1,007 1,342 2,349
2009-10 11,638 17,479 29,117 1,120 3,436 4,556 259 287 546 1,242 1,904 3,146
Total 39,454 48,668 88,122 4,825 8,562 13,387 1,131 719 1,850 4,949 5,075 10,024
2010-11 12,927 22,521 35,448 1,375 4,350 5,725 114 362 476 1,364 2,397 3,761
2011-12 14,119 24,404 38,524 1,485 4,682 6,167 123 387 510 1,541 2,478 4,019
2012-13 14,957 26,327 41,284 1,604 5,040 6,643 132 415 547 1,725 2,567 4,292
2013-14 15,931 28,322 44,253 1,724 5,403 7,127 142 445 587 1,966 2,579 4,544
2014-15 16,916 30,378 47,294 1,853 5,767 7,620 152 474 627 2,201 2,638 4,838
Total 74,850 131,953 206,803 8,040 25,242 33,282 664 2,083 2,747 8,796 12,659 21,455
2015-16 17,806 32,323 50,129 1,992 6,195 8,187 163 508 671 2,394 2,640 5,034
2016-17 18,686 34,285 52,971 2,132 6,636 8,768 175 544 719 2,727 2,830 5,556
2017-18 19,610 36,360 55,970 2,280 7,033 9,314 187 576 763 3,083 2,789 5,873
2018-19 20,582 38,549 59,131 2,440 7,489 9,929 200 614 814 3,481 2,740 6,221
2019-20 21,617 40,731 62,348 2,611 7,875 10,486 214 645 859 3,777 2,921 6,699
Total 98,301 182,248 280,549 11,455 35,229 46,684 939 2,887 3,826 15,462 13,920 29,382
8
PSDP Financial Allocations (Rs. in Million)
Period Chemicals2 Engineering Electronics Energy3
S&T HRD/ Skill Total S&T
HRD/ Skill Total S&T
HRD/ Skill Total S&T
HRD/ Skill Total
2005-06 2,100 625 2,725 2,792 1,871 4,663 1,000 670 1,670 1,100 570 1,670
2006-07 2,247 938 3,185 3,003 2,819 5,822 1,080 1,014 2,094 1,186 840 2,026
2007-08 2,427 1,400 3,827 3,283 4,261 7,544 1,172 1,521 2,693 1,293 1,237 2,530
2008-09 2,623 2,109 4,732 3,546 6,414 9,960 1,274 2,305 3,580 1,413 1,843 3,256
2009-10 2,838 3,405 6,243 3,829 10,336 14,166 1,389 3,750 5,139 1,548 2,951 4,499
Total 12,235 8,477 20,712 16,453 25,702 42,155 5,916 9,260 15,176 6,539 7,441 13,980
2010-11 3,077 4,327 7,404 4,136 13,087 17,222 1,518 4,802 6,320 1,696 3,719 5,416
2011-12 3,335 4,674 8,009 4,467 14,086 18,552 1,662 5,241 6,903 1,860 3,993 5,853
2012-13 3,622 5,059 8,680 4,824 15,161 19,985 1,824 5,731 7,555 2,002 4,396 6,398
2013-14 3,934 5,479 9,412 5,210 16,327 21,537 2,006 6,286 8,292 2,186 4,809 6,996
2014-15 4,280 5,919 10,199 5,653 17,590 23,243 2,226 6,928 9,154 2,361 5,305 7,666
Total 18,247 25,457 43,704 24,289 76,250 100,540 9,236 28,989 38,224 10,106 22,222 32,328
2015-16 4,665 6,448 11,113 6,133 19,075 25,208 2,494 7,755 10,249 2,609 5,786 8,396
2016-17 5,094 7,048 12,142 6,535 20,344 26,879 2,793 8,695 11,487 2,860 6,398 9,258
2017-18 5,573 7,639 13,212 7,220 22,268 29,488 3,156 9,733 12,888 3,145 7,020 10,166
2018-19 6,052 8,256 14,309 7,834 24,046 31,880 3,629 11,140 14,769 3,454 7,720 11,174
2019-20 6,621 8,876 15,497 8,500 25,638 34,138 4,174 12,589 16,762 3,781 8,174 11,955
Total 28,005 38,268 66,273 36,222 111,371 147,593 16,245 49,911 66,156 15,850 35,099 50,949
9
PSDP Financial Allocations (Rs. in Million)
Period IT Construction Total Expenditure
S&T
HRD/ Skill Total S&T
HRD/ Skill Total S&T
HRD/ Skill Total
Projected GDP
2005-06 1,050 704 1,754 130 98 228 14,238 9,450 23,688 6,050,700
2006-07 1,125 1,056 2,181 150 138 288 16,834 14,175 31,009 6,480,300
2007-08 1,215 1,577 2,792 170 190 360 19,520 21,263 40,783 6,953,400
2008-09 1,318 2,384 3,703 180 277 457 22,385 31,894 54,279 7,474,900
2009-10 1,437 3,879 5,316 200 414 614 25,500 47,841 73,340 8,072,900
Total 6,145 9,600 15,745 830 1,118 1,948 98,477 124,622 223,099 35,032,200
2010-11 1,574 4,979 6,553 230 485 715 28,009 61,031 89,040 8,718,700
2011-12 1,726 5,443 7,170 250 526 776 30,568 65,913 96,482 9,416,200
2012-13 1,899 5,967 7,866 300 524 824 32,887 71,187 104,074 10,169,500
2013-14 2,108 6,605 8,712 300 627 927 35,506 76,882 112,388 10,983,100
2014-15 2,360 7,345 9,705 330 685 1,015 38,332 83,028 121,361 11,861,200
Total 9,666 30,339 40,006 1,410 2,846 4,256 165,304 358,041 523,344 51,148,700
2015-16 2,656 8,259 10,915 390 684 1,074 41,302 89,675 130,977 12,810,700
2016-17 3,001 9,342 12,343 450 726 1,176 44,452 96,849 141,300 13,835,500
2017-18 3,391 10,458 13,849 520 720 1,240 48,165 104,597 152,762 14,942,400
2018-19 3,810 11,694 15,504 590 716 1,306 52,073 112,964 165,037 16,137,700
2019-20 4,140 12,487 16,627 600 804 1,404 56,035 120,742 176,776 17,248,800
Total 16,997 52,242 69,239 2,550 3,651 6,201 242,026 524,826 766,852 74,975,100
1 Does not include the cost of setting up Steel Mills at Nokundi and Kalabagh which would cost Rs. 39 Billion and Rs 49 Billion respectively. This will be taken up by the private sector.
2 Chemicals sector would require private sector investment in the next five years of Rs.245 billion. 3 WAPDA and other costs are not included.
Note: The figures beyond 2010 are suggestive. Most of the projects initiated upto 2009-10 will continue further and new projects will be added
10
Annexure 17.3 PSDP Financial Allocation (Percentage Share in Total Allocation)
Period Agriculture Textile Leather Materials
S&T HRD/ Skill Total S&T
HRD/ Skill Total S&T
HRD/ Skill Total S&T
HRD/ Skill Total
2005-06 29.117 40.968 33.845 5.795 6.665 6.142 1.370 0.567 1.050 6.321 3.782 5.308
2006-07 35.921 40.762 38.134 5.266 6.692 5.918 1.248 0.567 0.936 5.346 3.974 4.719
2007-08 40.353 40.598 40.481 4.909 6.661 5.822 1.153 0.562 0.844 4.611 4.273 4.434
2008-09 43.538 40.472 41.736 4.625 6.683 5.835 1.081 0.560 0.775 4.498 4.208 4.328
2009-10 45.639 36.535 39.700 4.391 7.182 6.212 1.016 0.600 0.745 4.871 3.980 4.290
2010-11 46.152 36.901 39.811 4.908 7.128 6.430 0.408 0.593 0.535 4.868 3.928 4.224
2011-12 46.190 37.025 39.928 4.857 7.103 6.392 0.402 0.587 0.529 5.042 3.759 4.166
2012-13 45.479 36.983 39.668 4.876 7.080 6.383 0.401 0.583 0.525 5.244 3.607 4.124
2013-14 44.868 36.839 39.375 4.856 7.027 6.341 0.400 0.579 0.522 5.536 3.354 4.044
2014-15 44.130 36.588 38.970 4.835 6.945 6.279 0.398 0.571 0.516 5.741 3.177 3.987
2015-16 43.112 36.045 38.273 4.823 6.909 6.251 0.395 0.566 0.512 5.796 2.944 3.843
2016-17 42.037 35.400 37.488 4.795 6.852 6.205 0.393 0.562 0.509 6.134 2.922 3.932
2017-18 40.713 34.762 36.639 4.735 6.724 6.097 0.388 0.551 0.499 6.402 2.667 3.844
2018-19 39.525 34.125 35.829 4.686 6.630 6.016 0.384 0.543 0.493 6.685 2.425 3.769
2019-20 38.578 33.734 35.269 4.659 6.522 5.932 0.382 0.535 0.486 6.741 2.419 3.789
11
Annexure 17.4 PSDP Financial Allocation (Percentage Share in Total Allocation)
Period Chemicals Engineering Electronics Energy
S&T
HRD/ Skill Total S&T
HRD/ Skill Total S&T
HRD/ Skill Total S&T
HRD/ Skill Total
2005-06 14.750 6.618 11.506 19.610 19.797 19.685 7.024 7.091 7.050 7.726 6.027 7.048
2006-07 13.348 6.615 10.270 17.838 19.889 18.776 6.416 7.153 6.753 7.043 5.925 6.532
2007-08 12.433 6.584 9.384 16.819 20.040 18.499 6.004 7.154 6.603 6.623 5.817 6.203
2008-09 11.718 6.612 8.718 15.841 20.111 18.350 5.693 7.228 6.595 6.312 5.779 5.999
2009-10 11.129 7.117 8.512 15.017 21.606 19.315 5.448 7.838 7.007 6.069 6.168 6.134
2010-11 10.985 7.090 8.315 14.765 21.443 19.342 5.418 7.869 7.098 6.056 6.094 6.082
2011-12 10.909 7.091 8.301 14.612 21.370 19.229 5.437 7.951 7.155 6.086 6.058 6.066
2012-13 11.012 7.106 8.340 14.668 21.297 19.203 5.545 8.051 7.259 6.088 6.175 6.147
2013-14 11.079 7.126 8.375 14.674 21.237 19.163 5.650 8.177 7.378 6.157 6.256 6.225
2014-15 11.165 7.129 8.404 14.747 21.186 19.152 5.808 8.344 7.543 6.158 6.390 6.317
2015-16 11.295 7.191 8.485 14.850 21.271 19.246 6.038 8.648 7.825 6.318 6.453 6.410
2016-17 11.460 7.278 8.593 14.701 21.006 19.023 6.283 8.977 8.130 6.434 6.606 6.552
2017-18 11.570 7.303 8.649 14.990 21.289 19.303 6.552 9.305 8.437 6.531 6.712 6.655
2018-19 11.623 7.309 8.670 15.044 21.286 19.317 6.969 9.861 8.949 6.634 6.834 6.771
2019-20 11.816 7.351 8.766 15.169 21.234 19.312 7.448 10.426 9.482 6.747 6.770 6.763
12
PSDP Financial Allocation (Percentage Share in Total Allocation)
Period IT Construction S&T HRD/Skill Total S&T HRD/Skill Total
2005-06 7.375 7.445 7.403 0.913 1.040 0.964
2006-07 6.683 7.451 7.034 0.891 0.971 0.928
2007-08 6.224 7.416 6.846 0.871 0.895 0.884
2008-09 5.889 7.476 6.821 0.804 0.870 0.843
2009-10 5.635 8.108 7.248 0.784 0.865 0.837
2010-11 5.618 8.158 7.359 0.821 0.795 0.803
2011-12 5.647 8.258 7.431 0.818 0.797 0.804
2012-13 5.773 8.383 7.558 0.912 0.736 0.792
2013-14 5.936 8.591 7.752 0.845 0.815 0.825
2014-15 6.158 8.846 7.997 0.861 0.825 0.836
2015-16 6.430 9.210 8.333 0.944 0.763 0.820
2016-17 6.751 9.646 8.736 1.012 0.750 0.833
2017-18 7.040 9.999 9.066 1.080 0.688 0.811
2018-19 7.317 10.352 9.395 1.133 0.634 0.791
2019-20 7.388 10.342 9.406 1.071 0.666 0.794
13
PSDP FINANCIAL ALLOCATION (PERCENT SHARE IN GDP)
Period
Agrculture Textile Leather Materials1
S&T HRD/Skill
Total S&T
HRD/Skill
Total S&T
HRD/Skill Total S&T
HRD/Skill
Total
2005-06
0.068514
0.063984
0.132499
0.013635
0.01041
0.024045
0.003223
0.000886
0.0041087
0.014874
0.005906
0.020781
2006-07
0.09331
0.089163
0.182474
0.013678
0.014639
0.028317
0.003241
0.00124
0.0044808
0.013888
0.008693
0.022581
2007-08
0.113283
0.124143
0.237426
0.01378
0.020367
0.034147
0.003236
0.001717
0.004953
0.012943
0.013065
0.026009
2008-09
0.130386
0.172684
0.30307
0.013852
0.028516
0.042368
0.003238
0.002391
0.0056284
0.013472
0.017956
0.031428
2009-10
0.144161
0.216509
0.36067
0.013871
0.042559
0.05643
0.003208
0.003558
0.006766
0.015385
0.023585
0.038969
2010-11
0.148267
0.258308
0.406576
0.015768
0.049898
0.065666
0.001312
0.004152
0.0054642
0.01564
0.027496
0.043136
2011-12
0.149948
0.259173
0.409121
0.015769
0.049724
0.065493
0.001304
0.004112
0.0054166
0.016369
0.026315
0.042684
2012-13
0.147075
0.258884
0.405959
0.015769
0.049558
0.065327
0.001298
0.004079
0.0053773
0.016959
0.025246
0.042205
2013-14
0.14505
0.25787
0.40292
0.015697
0.049191
0.064888
0.001293
0.004052
0.0053446
0.017898
0.023479
0.041376
2014-15
0.142618
0.256113
0.398731
0.015624
0.048618
0.064242
0.001285
0.003998
0.005283
0.018553
0.022237
0.04079
2015-16
0.138995
0.252313
0.391307
0.01555
0.048361
0.063911
0.001274
0.003962
0.0052361
0.018685
0.020608
0.039293
2016-17
0.135061
0.247803
0.382864
0.015407
0.047964
0.063371
0.001263
0.003933
0.0051967
0.019708
0.020451
0.040159
2017-18
0.131234
0.243336
0.37457
0.015261
0.047069
0.06233
0.00125
0.003856
0.0051058
0.020635
0.018668
0.039303
2018-19
0.12754
0.238873
0.366413
0.01512
0.046409
0.061529
0.001239
0.003804
0.0050434
0.021571
0.016977
0.038549
2019-20
0.125325
0.236138
0.361463
0.015136
0.045655
0.060791
0.001241
0.003742
0.0049829
0.021898
0.016936
0.038835
14
PSDP FINANCIAL ALLOCATION (PERCENT SHARE IN GDP)
Chemicals2 Engineering Electronics Energy3
S&T HRD/Skill Total S&T HRD/Skill Total S&T HRD/Skill Total S&T HRD/Skill
0.034707 0.010336 0.045043 0.046143 0.030919 0.077063 0.016527 0.011074 0.027601 0.01818 0.009413
0.034674 0.014469 0.049143 0.046337 0.043504 0.089842 0.016666 0.015647 0.032313 0.018295 0.012961
0.034904 0.020133 0.055037 0.047217 0.06128 0.108498 0.016855 0.021875 0.03873 0.018594 0.017789
0.035093 0.028213 0.063306 0.047439 0.08581 0.133249 0.017049 0.030839 0.047888 0.018904 0.024658
0.035155 0.042176 0.077331 0.047433 0.128039 0.175472 0.017208 0.046451 0.06366 0.019172 0.036554
0.03529 0.049631 0.084921 0.047434 0.150099 0.197533 0.017406 0.05508 0.072487 0.019454 0.042661
0.035416 0.049635 0.085051 0.047437 0.149589 0.197026 0.01765 0.055659 0.073309 0.019756 0.042403
0.035612 0.049743 0.085356 0.047436 0.149081 0.196517 0.017932 0.056357 0.074289 0.01969 0.043223
0.035815 0.049884 0.085699 0.047437 0.148658 0.196094 0.018264 0.057238 0.075502 0.019906 0.043789
0.036082 0.049902 0.085984 0.047658 0.148299 0.195957 0.01877 0.058409 0.077179 0.019902 0.044727
0.036415 0.050336 0.086751 0.047876 0.1489 0.196776 0.019465 0.060539 0.080004 0.020368 0.045168
0.036818 0.050944 0.087762 0.047232 0.147043 0.194275 0.020186 0.062842 0.083028 0.020672 0.046243
0.037295 0.051123 0.088418 0.048319 0.149026 0.197344 0.021118 0.065134 0.086252 0.021051 0.046982
0.037503 0.051162 0.088665 0.048545 0.149004 0.197548 0.022489 0.069028 0.091517 0.021405 0.047838
0.038385 0.051458 0.089843 0.049279 0.148638 0.197917 0.024196 0.072983 0.09718 0.02192 0.047391
15
PSDP FINANCIAL ALLOCATION (PERCENT SHARE IN GDP)
IT Construction Total Expendicture Period
S&T HRD/Skill Total S&T HRD/Skill Total S&T HRD/Skill Total
2005-06 0.017353 0.011628 0.028981 0.002149 0.001624 0.003773 0.235305 0.15618 0.391485
2006-07 0.01736 0.016299 0.033659 0.002315 0.002125 0.00444 0.259766 0.21874 0.478505
2007-08 0.017473 0.022678 0.040151 0.002445 0.002738 0.005182 0.28073 0.305786 0.586516
2008-09 0.017635 0.031899 0.049534 0.002408 0.003711 0.006119 0.299475 0.426678 0.726153
2009-10 0.0178 0.04805 0.06585 0.002477 0.005127 0.007605 0.31587 0.592608 0.908477
2010-11 0.018047 0.057109 0.075157 0.002638 0.005565 0.008203 0.321257 0.7 1.021257
2011-12 0.018332 0.057809 0.076141 0.002655 0.005581 0.008236 0.324636 0.7 1.024636
2012-13 0.018671 0.058678 0.077348 0.00295 0.005151 0.008101 0.323391 0.7 1.023391
2013-14 0.019189 0.060134 0.079322 0.002731 0.005707 0.008438 0.323279 0.7 1.023279
2014-15 0.0199 0.061924 0.081824 0.002782 0.005772 0.008554 0.323175 0.7 1.023175
2015-16 0.02073 0.064472 0.085202 0.003044 0.005341 0.008385 0.322401 0.7 1.022401
2016-17 0.02169 0.067525 0.089215 0.003253 0.00525 0.008503 0.321289 0.7 1.021289
2017-18 0.022693 0.06999 0.092684 0.00348 0.004816 0.008296 0.322337 0.7 1.022337
2018-19 0.023609 0.072467 0.096076 0.003656 0.004438 0.008094 0.322678 0.7 1.022678
2019-20 0.024002 0.072396 0.096397 0.003479 0.004663 0.008142 0.324861 0.7 1.024861
16
LIST OF EXPERTS/CONSULTANTS Agriculture 1. Dr Riaz Hussain Qureshi
Ex Vice Chancellor, University of Agriculture, Faisalabad.
2. Dr Khalid Mahmood Khan Vice Chancellor, University of Arid Agriculture, Rawalpindi.
3. Dr. Badaruddin Soomro Chairman, Pakistan Agricultural Research Council, Islamabad.
4. Dr Amir Muhammad Ex Chairman, Pakistan Agricultural Research Council, Islamabad.
5. Dr Bashir Ahmad Vice Chancellor, University of Agriculture, Faisalabad.
6. Dr. Zafar Altaf Ex- Secretary, Ministry of Food, Agriculture, and Livestock, Islamabad.
7. Dr Kauser Abdullah Malik, Member (Biosciences), Pakistan Atomic Energy Commission, P. O. Box-1114, Islamabad.
8. Dr Maqsood Ahmad Gill Professor, Department of Soil Science, University of Agriculture, Faisalabad.
9. Dr Abdul Salam Member (Economics), Agricultural Prices Commission, P. O. Box-1739, Islamabad.
10. Dr. Muhammad Afzal Chief Scientific Officer/Incharge, Animal Sciences Division, Pakistan Agricultural Research Council, Islamabad.
11. Mr. Ghulam Abbas Jalvi Ex Director General Agriculture, Punjab, Lahore.
12. Dr Nafees Sadiq Kissana Wheat, Barley, and Triticale Programme, National Agricultural Research Centre, Islamabad.
13. Dr. Muhammad Salim, PSO/Coordinator, National Coordinated Rice Programme, National Agricultural Research Centre, Islamabad.
14. Dr. Muhammad Salim Deputy Director General, Institute of Natural Resources and Environmental Sciences, National Agricultural Research Centre, Islamabad.
15. Dr Iftikhar Ahmad Coordinator, National Integrated Pest Management Programme, National Agricultural Research Centre, Islamabad.
16. Dr Nasim Ahktar Deputy Director General, Animal Sciences, National Agricultural Research Centre, Islamabad.
17
17. Dr. Muhammad Yaqoob Principal Scientific Officer, Fisheries Research Institute, National Agricultural Research Centre, Islamabad.
18. Dr. Muhammad Aslam Gill Commissioner Minor Crops, Ministry of Food, Agriculture, and Livestock, Islamabad.
19. Mr. Mashooq Ali Bhutto President, Livestock Development Foundation, 4-A, Mezzanine Floor, U.S Aid Plaza, Fazal-e-Haq Road, Blue Area, Islamabad.
20. Dr. Maqbool Akhtar Senior Scientific Officer, Sugarcane Programme, National Agricultural Research Centre, Islamabad.
21. Mr. Masud A. Daher Chie f Executive, Mille Zum Consult (Pvt.) Ltd. House No. 82, Hill Side Road, E-7, Islamabad.
22. Mr. Ikhlaq Hussain Shah Director General, Federal Seed Certification & Registration Department, Islamabad.
23. Mr. Afaq Tiwana Chairman, Pakistan Horticulture Development & Export Board, Waheed Trade Complex (2nd Floor), 36-XX, Khayaban-e-Iqbal, Lahore.
24. Dr. M. Shafiq Chaudhry Director, Ramna Food Products (Pvt.) Ltd, 334-S.I.E. Kot Lakhpat, Lahore.
25. Dr. Hafeez-ur-Rahman Senior Scientific Officer, HRI, National Agricultural Research Centre, Islamabad.
26. Dr. Muhammad Azeem Khan Principal Scientific Officer, National Integrated Pest Management Programme, National Agricultural Research Centre, Islamabad.
27. Dr Abudl Rehman Senior Scientific Officer, National Coordinated Rice Programme, National Agricultural Research Centre, Islamabad.
28. Dr Shujat Ali Project Director, Punjab Resource Management Programme, 142-Jail Road, Shadman, Lahore.
Textile
1. Dr. S. T. K. Naim COMSTECH Constitution Avenue Islamabad
2. Dr. Abdul Majeed Former Principal National College of Textile Engineering Faisalabad
18
3. Muhammad Idrees Ahmed Textile Commissioner Ministry of Industries and Production, Karachi
4. Mr. Tariq Saeed Saigol Chief Executive Kohinoor – Maple Leaf Group, Lahore
The Pakistan Leather Industry
1. Dr. S. T. K. Naim COMSTECH Constitution Avenue, Islamabad
2. Mr. Naseem-ul-Haq Satti Experts Advisory Cell Ministry of Industries & Production, Islamabad
3. Mr. Ghulam Abbas Acting Director Leather Research Centre Pakistan Council of Scientific and Industrial Research, Karachi
4. Syed Raza Hassan Gardezi Economic & Financial Analyst Expert Advisory Cell Ministry of Industries & Production, Islamabad
5. Mr. Abrar Ahmad Deputy Chief (P&D) Pakistan Council for Science and Technology, Islamabad
6. Mr. M. Saeed Khan STO Leather Research Institute, Karachi
7. Mr. Tariq Minhas SMO Leather Technology Leather Research Institute, Karachi
8. Mr. Muhammad Ayoub Sabir Chief Executive Prime Colour Trading Company #6, Pakistan Market, ST.#5 Wakilan Wali, Kuthcery Bazar, Faisalabad
Materials 1. Dr. S. T. K. Naim COMSTECH Constitution Avenue, Islamabad
2. Dr Anwar ul Haq Chairman PCSIR, Head Office #16, Islamabad
3. Mr. Imtiaz Rastgar M/s Rastgar Industries Ltd. Plot #307, St.3, I-9/3, Islamabad
4. Mr S. H. Faruqi Chairman Eastern Technique (Pvt) Ltd, Islamabad.
5. Mr. Mushtaq Hussain PCSIR, Islamabad
19
6. Mr Tajamal Hussain Consultant Experts Advisory Cell, Islamabad
7. Engr. Tariq Mahmood BET, Lahore
8. Mr Zamir Ahmad Awan Deputy Chief (Tech-P) PCST, Islamabad
9. Dr. Ghulam Rasool Chaudhry Ceramics Industries, K-18 Defence Housing Society, Lahore
Chemical Processing Industry
1. Dr. S. T. K. Naim COMSTECH Constitution Avenue, Islamabad
2. Prof. Muhammad Iqbal Chaudhary Fellow of the Islamic Academy of Science H.E.J. Research Institute of Chemistry International Center for Chemical Science University of Karachi, Karachi
3. Prof. Dr. Bina S. Siddiqui Professor H.E.J. Research Institute of Chemistry International Center for Chemical Science University of Karachi, Karachi
4. Mr. Zahid Aziz Chief Experts Advisory Cell Ministry of Industries & Production, Islamabad.
5. Dr. W.M. Butt Chief Executive PCSIR, Lahore
6. Dr. M. Khalid Farooq Director General PCSIR, Lahore
7. Dr. Zafar Iqbal Associate Professor Department of Pharmacy University of Peshawar, Peshawar
8. Mr. A.Q. Javed Iqbal Chief Pharmacist Pakistan Institute of Medical Sciences, Islamabad
9. Mr. Muhammad Ashfaque Paracha Delta Pharma
10. Mr. G. Murtaza Choudhry Director PyroChem (Pvt) Limited 38-Bank Square Market Model Town, Lahore
11. Mr. Muhammad Ayub Sabir Chief Executive Prime Colour Trading Company 6-Pakistan Market St.#5 Wakilan Wali, Kuthcery Bazar, Faisalabad
20
12. Mr. Naveed A. Hashmi Resident Manager Engro Chemical Pakistan Ltd. 6-Mezzanine Floor Razia Sharif Plaza, Blue Area, Islamabad
13. Mr Zamir Ahmad Awan Deputy Chief (Tech-P) PCST, Islamabad
Engineering Goods Industry of Pakistan
1. Mr. Liaqat Ali Naz General Manager Services Shirazi Trading Company (Private) Limited 2nd Floor, Nadir House, I.I. Chundrigar Road, Karachi-74000
2. Dr. Shaukat Hameed Khan Director General (O & C) Pakistan Atomic Energy Commission P. O. Box 1114, Islamabad
3. Mr. Mohsin M. Syed Chairman Punjab Industrial Estates Development and Management Company Owned by: Govt. of Punjab 1st Floor, Saudi Pak House 14-Egerton Road, Lahore
4. Engr. M. A. Fidai General Manager (Sales & Mktg.) Heavy Mechanical Complex (PVT) LTD, TAXILA State Engineering Corporation Ministry of Industries & Production Government of Pakistan,
5. Syed Ali Enser General Manager (Engg.) Heavy Mechanical Complex, Taxila Taxila -47050 Pakistan State Engineering Corporation Ministry of Industries & Production Government of Pakistan
6. Dr. Nasir ud Din Gohar Associate Professor Faculty of Electronic Engineering Ghulam Ishaq Khan Institute of Engineering Sciences and Technology
7. Mr. Samir A. Hoodbhoy Managing Director Data Communication & Control (Pvt.) Ltd. 409, Clifton Centre, DC-1, Block-5, Clifton Karachi-75600
8. Mr. Muhammad Anwar Janjua Managing Director Heavy Mechanical
21
Complex (Pvt) Ltd. Taxila State Engineering Corporation Ministry of Industries & Production
Government of Pakistan Electronics 1. Dr. S. T. K. Naim
COMSTECH Constitution Avenue Islamabad
2. Mr. Syed Asadullah General Manager Sales Siemens Electrical Company Islamabad
3. Mr. Muhammad Afzal Managing Director Carrier Telephone Industries Islamabad
4. Mr. Shahid Zaki Managing Director Philips Electrical Company Karachi
5. Dr. Nasir ud Din Gohar Associate Professor Faculty of Electronic Engineering Ghulam Ishaq Khan Institute of Eng. Sciences and Tech.
6. Engr. Javed Safdar Chief Engineer Telephone Industries of Pakistan, Haripur
7. Mr. Arif Khan Comcept (Private) Limited 316, Main Margalla Road, Islamabad
8. Mr. Mohsin M. Syed Managing Director Hybrid Technics (Pvt) Ltd. 13-Fane Road, Lahore
9. Mr. Samir A. Hoodbhoy Managing Director Data Communication & Control (Pvt.) Ltd. 409, Clifton Centre, DC-1, Block-5 Clifton, Karachi
10. Mr. Zerullah Khan Managing Director Pak Telecom, Islamabad
11. Dr. Noor Muhammad Sheikh Dean Electrical University of Engineering and Technology, Lahore
12. Dr. Saeed ur Rehman Director Care (Pvt.) Ltd., Islamabad
Energy-Power
1. Dr. S. T. K. Naim COMSTECH Constitution Avenue, Islamabad
22
2. Brigadier Dr. Nasim A. Khan Alternate Energy Development Board (AEDB) Prime Minister Secretariat, Islamabad
3. Dr Parvez Akhtar Director General PCRET, Sector H-9, Islamabad
4. Mr. Akhtar Ali Chief Executive Best Power Solutions , Islamabad
5. Mr Zamir Ahmad Awan Deputy Chief (Tech-P) PCST, Islamabad
6. Mr. Ahmad Mumtaz Director (ASAG) PAEC, Islamabad
7. Dr. Farzana Naqvi PAEC, Islamabad
Telecommunication
1. Mr. Shahid Zaki Chairman & CEO F-54, SITE Karachi-75730
2. Mr. Muhammad Akhtar Iqbal National Telecommunication, Corporation Headquarters, F-5/1, Islamabad
3. Mr. Humayun Zafar Director Software Division ECI House No.1, Street No. 95 Sector I-8/4, Islamabad
4. Mr. M. Naeem Siddiqi Chief Executive Computer Supermarket 103 Golden Plaza, Fazal-ul-Haq Road, F/7 F/7, Blue Area, Islamabad
5. Mr. Munir Ahmed Marketing Executive 34-Nazimu ddin Road, F-8/4, Islamabad
Information Technology
1. Dr. S. T. K. Naim COMSTECH Constitution Avenue, Islamabad
2. Mr. Humayun Zafar Director Software Division Electro Control Industries ECI House No.1 Street No.95, I-8/4, Islamabad
23
3. Mr. M. Naeem Siddiqi Chief Executive Computer Supermarket 103 Golden Plaza, Fazal-ul-Haq Road F/7, G/7, Blue Area, Islamabad
4. Mr. Tahir Chaudhry President Pakistan Computer Society, Islamabad
Construction and Housing Sector
1. Dr. S. T. K. Naim COMSTECH Constitution Avenue, Islamabad
2. Mr Zamir Ahmad Awan Deputy Chief (Tech-P) PCST, Islamabad
3. Engr. Dr. Ataullah Maher CWHR, Karachi
Transport Sector 1. Engr. Faqir Ahmad Paracha 5 Chinar Road, University Town, Peshawar
2. Mr. Irfan Naqvi Chief Executive Officer 31-32, Old Ralli Bldg Talpur Road, Karachi-74000
24
LIST OF COMMITTEES / MEMBERS
S.No. Name of Committees Name of Members Address National Committee on Renewable Energy (NCERE)
Brig. Dr. Nasim A. Khan (Convener)
Alternative Energy Development Board, Prime Minister Secretariat, Office # 344-B, Constitution Avenue, Islamabad
Dr. Pervez Akhtar, Member
Director, Pakistan Council of Renewable Energy Technologies, Plot # 25, Sector H-9, Islamabad
Dr. Irshad Ahmed, Member
House No. 1116, St-26, I=10/4, Islamabad.
1
Col. Syed Irshad Ali, Member
Central Inspection Technical Development – Chaklala, Rawalpindi.
National Committee on Water Research Development and Management (NCWRDM)
Dr. M. Akram Kahlon (Convener)
Chairman, PCRWR, 3&5, St -17, F-6/2, Islamabad.
Mr. Muhammad Riaz Ahmad Khan, Member
Additional Secretary, Ministry of Water & Power, Pak Secretariat, Block A, Islamabad.
Mr. Riaz Nazir Tarrar, Member
Project Manager, CRBC Project, #25-P, Model Town Extension, Lahore
Mr. Ahmad Khan Bhatti, Member
Member (Water), 228 WAPDA , Lahore
2.
Dr. Abdul Majeed, Member
Chief (Research) Pakistan Council of Research in Water Resources, Ministry of Science & Technology, Government of Pakistan, 3&5, St-17, F-6/2, Islamabad.
National Committee on Agriculture (NCA)
Dr. Riaz Hussain Qureshi, (Convener)
Vice Chancellor, Agriculture University, Faisalabad
Dr. Amir Muhammad Rector, National university of Computer & Engineering Sciences, Islamabad
Dr. S. Iqbal Shah, Member
Vice Chancellor, NWFP University, Peshawar
Dr. Ghulam Ahmad, Member
Director General (Agri-Research), Ayub Agricultural Research Institute, Faisalabad
Dr. Rashid Javed, Member
Programme Coordinator, Area Development Program, ADBP-UNDP, Opp. University of Balochis tan, Quetta
3.
Prof. Dr. Maqsood Ahmed Gill, Member
Department of Soil Sciences, University of Agriculture, Faisalabad
25
National Committee on Biotechnology & Genetic Engineering (NCBGE)
Dr. Kausar Abdullah Malik (Convener)
Member (Bio0-Science), PAEC Headquarters, P.O. Box 1114, Islamabad
Dr. Ahmad Kukhtar Khalid, Member
Director NIBGE, P.O. Box 577, Faisalabad
Dr. Anwar Nasim, Member
Adviser (Sciences), COMSTECH Secretariat, 3-Constitution Avenue, G-5/2, Islamabad
Dr. Yousaf Zafar, Member
Principal Scientific Officer (NIBGE), PO Box 577, Faisalabad
4
Dr. Riaz-ud-Din Sheikh, Member
Director, Centre for Advance Molecular Biology, Lahore
National Committee on Engineering & Manufacturing (NCME)
Dr. Abdullah Sadiq, Convener
Rector, Pakistan Institute of Engineering & Applied Sciences, Nilore, Islamabad
Prof. Dr. Abdul Baseer, Member
Chairman, Department of Chemical Engineering, University of Engineering & Technology, Peshawar
Dr. Saeed Ahmed Khan, Member
Director, NFC Institute of Chemical Engineering & Technology, Multan
Engr. Samir Hoodbhoy, Member
Managing Director, Data Communication & Control (Pvt) Ltd. 409, Clifton Centre, DC-1, Block No.5, Clifton, Karachi
5.
Dr. Ashraf Iqbal, Member
Chairman, Department of Computer Sciences, LUMS, Defence Housing Authority, Lahore Cantt.
National Committee on Materials/New Materials (NCMNM).
Dr. Anwar-u l-Haq, (Convener)
Chairman, PCSIR, Head Office 16, H-9, Islamabad
Dr. Fazal Khalid, Member
G.I.K. Institute of Engineering Sciences & Technology, Topi Swabi, NWFP, Peshawar
Dr. M. Aslam, Member
Dean (Engineering), PIEAS, Nilore, Islamabad.
Dr. Moeen-ud-Din Khan, Member
General Manager, Quality Assurance & Development, Peoples Steel Mills Ltd. Mangopir, Karachi.
6
Dr. N.M. Butt, Member
Scientist Emeritus, Ex-D, G. PINSTECH, H# 155, St. #15, Sector E-7, Islamabad
National Committee on Technical Education (NCTE)
Dr. Syed Amir Ali, Convener
Millat Tractor, Sheikhpura Road, Lahore
7 Mrs. Farida Javed,
Member Principal, Ploytechnical Institute for Women H-8/1, Islamabad
26
Mr. Imtiaz Rastgar, Member
Rasttgar Engineering Co. Ltd., Plot No.307, St. 3, Sector I-9/3, Industrial Area, Islamabad
Dr. Ghulam Rasool Ch., Member
Ceramic Industries, K-18, Defence Housing Society, Lahore.
Mr. Ilyas Suri Director, Indus Motors, Karachi
Zaheer J. Paracha G.M. Academics, TEVTA, #71-B-CII, Gulberg III, Lahore
Mr. Mohsin Syed , Member
Managing Director, Hybrid Technical, 13-SANE ROAD, Lahore
National Committee on Human Resource Development for S&T (NCHRDST)
Dr. Asghar Qadir Head of Mathematics Dept. QAU, Islamabad
Dr. S.T. K. Naim, Member
Chairperson, PCST, Islamabad
Dr. A.R. Kemal, Member
Director, PIDE, QAU, Islamabad
Dr. Kausar Abdullah Malik, Member
Member (Admin & Bio Science), PAEC, Head Quarters, Islamabad
8.
Dr. Sohail Naqvi, Member
Higher Education Commission, Islamabad
National Committee on Electronics (NCE)
Dr. Noor Muhammad Sheikh, Convener
Director, Al-Khawarizmi Institute of Computer Science, UET, Lahore
Dr. Muhammad Riaz Suddle, Member
Director, SUPARCO, Lahore
Dr. Nasir-ud-Din Gohar, Member
Associate Professor, GIK Institute of Engineering Science & Technology, TOPI-SWABI-NWFP
Dr. Zartash Afzal Uzmi, Member
Assistant Professor, Lahore University for Management Sciences (LUMS), Lahore
9.
Dr. Saeed-ur-Rehman
Director, CARE private ltd. Attaturk Avenue, Sector G-5/2, Islamabad
National Committee on Pharmaceuticals and Drugs (NCPD)
Prof. Bina S. Siddiqui, Convener
H.E.J. Research Institute of Chemistry, International Centre for Chemical Science, University of Karachi.
Prof. Dr. Muhammad Shoaib Akhtar, Member
Dean and Prof. Of Pharmacology, Faculty of Veterinary Science, University of Agriculture, Faisalabad
10.
Dr. Zafar Iqbal, Member
Associate Professor, Department of Pharmacy, University of Peshawar, Peshawar 25120
27
Prof. Usman Ghani Khan, Member
Head, Department of Pre -Clinical Sciences, Faculty of Eastern Medicine, Hamdard University, Madinat-al-Hikmah, Karachi
Mr. Osman Khalid Waheed, Member
M/s Feroszons Laboratories Limited, 197-A, The Mall, Rawalpindi., 46000
National Committee on Environment/Conservation / Earth Sciences (NCECES)
Dr. Syed Ayub Qutub, Convener
Pakistan Institute for Environment Development Action Research, Office #3, 1st Floor, 64-E, Masco Plaza, Blue Area, Islamabad.
Dr. Rubina Rafiq, Member
NARC, Herbarium, Chak Shahzad, Islamabad.
11.
Dr. Basharat H. Bashir, Member
House #267, St.#54, Sector F-11/4, Islamabad
28
STRATEGIC INDUSTRIES
INTRODUCTION
1. Non-Western people envy the economic prosperity, technological sophistication, military power and political cohesion of Western society. The rise and strength of the West is largely attributed to the relationship between technology, public finance and political stability. Superior military technology is being exploited to secure and extend their power. We are in a period of rapid change now: the technology of war is changing and with it the nature of modern warfare. There has been an engineering revolution which has steadily transformed weapons and platform. A significant change in the capabilities of military sensors has improved the ability of individual platforms to analyze datas and to use the weapon more effectively. Technologies related to automated decision support systems and micro electronics are becoming more important. More recently there has been a very visible enhancement of command, control, communication and intelligence as applied to military forces. This has been possible only due to the strategic industrial infrastructure that is available to the developed world.
2. The integrated technological strength of a nation depends upon talented manpower, technology base and supporting infrastructure for industrial growth. The development of a strong strategic industrial base is pivotal for the meaningful progress of any country in all domains. Starategic industries are those that are likely to give a country a decisive advantage in terms of the technological strength in the long run.
3. Investment in military system leads to spin-off-advantage of use to the civil sector. For example in the US areas which benefited from military related investment included aviation and computing. Yet it is now widely accepted that, as the technology revolution has progressed, the speed of technological change in the civil sector has overtaken that in the military.
4. Pakistan has made some excellent progress in certain strategic fields but it remains dependent on imports for many of the critical technologies and systems. This could be attributed to large investment requirements and low volumes, making these industries commercially non viable. In case of developed countries, these industries have established themselves over the years with large global markets and today they proudly claim mostly responsible for the prosperity of their inhabitants. It is feared that many commercially motivated control regimes are being imposed on developing nations trying to establish their own strategic industrial base to deny them the fruits of such investment. In view of these special problems, concerted effeorts are required both by the government and the industry to circumvent these problems.
5. The wealth and prosperity of a nation depends on the effective utilization of its human and material resources through industrialization. Our enormous wealth of manpower can only become a true asset in the modern world when it is properly trained and educated. Therefore we must try to improve the standards and quality of education in our country at all levels. Higher education in the fields of science & engineering in particular needs special attention.
6. The life line of the industry is the flow of technology. Constant flow of the state-of-the-art technology and modernization is essential for the survival and growth of any industry. Our technology policy should provide for a judicious import of the technology required for the growth of our industry. The acquisition and development of these technologies will enhance production of top quality, high value strategic weapons/equipment and systems. This will save large amount of money being spent by our country on import of these items, and their export can also become one of the major sources of foreign exchange earnings. Such technology oriented prof ile is considered vital for rapid growth of our GDP, and in trun improve the standard of living in our country.
29
7. The critical technology areas identified for the establishment of design facilities and development of strategic industries in the country includes:
a. Metallurgy, critical materials and their processing.
b. Electronic and photonic materials.
c. Structures, Sturctural Design and Processing.
d. Design & Development of Aircraft.
e. Guidance and Control Systems (G&C).
f. Computer and electronics Systems.
g. Radars and Opto-electronic Devices.
h. Hydro Technologies.
i. Communication & electronics warfare systems.
j. Mechatronics and Computational Fluid Dynamics.
k. Encryptology and Computer Security.
l. Satellite launch vehicles.
m. Satellite/Data receiving centers.
8. Identified critical technology areas and Goals for their development by Strategic Organizations are appended below:-
30
STRATEGIC TECHNOLOGIES
NESCOM
GOALS TECHNOLOGY AREA
Phase-I (2005-2010) Phase-II (2010-2015) Phase-III (2015-2020)
Metallurgy & critical Matterials
• Design of Heat Treatment Cycles • Design and Development of
Surface Treatment/Coatings
• Material, Characterization and Evaluation
• Composites
• Neno-Composites
Structural Design • Experimental modal analysis of structure
• Structure design
• Vibration, shock analysis & design
• Grain, Nozzle & Design
• Intelligent, Adaptive Structures
• Optimum Design using Virtual Reality Models
Guidance & Control Systems (G&C)
• Atmospheric modeling, vehicle dynamics modeling and computer simulations
• Design and development of inertial and navigation sensors and systems.
• Design development of digital signal processing & image processing algorithms
• Design and optimization of trajectories and vehicle design objectives
• Manufacture of inertial and navigation sensors
• Inertial and navigation systems for ABMS, Space vehicles and intelligent target seeking devices
Computer and Electronic Systems
• Design & Production of hybrid chips
• Mobile Communication
• GPS Based Systems. • Design of Micro-Processors,
Micro-Controller and BSP Based Systems
• Development and Analysis of various codes and software for different Applications
• Design & Development of Simulators
• Design of Systems around PLCs & Embedded Controller.
• Silicon & GaAs devices Based on VLSI Technology
• Real time simulation
• Design and Production Technologies for USLI & Beyond
Radars and Opto-electronic Devices.
• Research & Development of Airborne, Mono-pluse and Phased Array Radars
• Development of Radar Seekers and Redomes
• Design & Development Optic and Opto-Electronic Devices
• Neno Technologies/MEMs Design & Development
• IR Detectors
• Neno Technologies/ MEMs Design & Development
Hydro Technologies. • Transducer Development and • Design and Development • Design & Construction of Submarines
31
Integration
• Design & Development of Underwater Sensors and System
• Development of Underwater Stealth Technologies
of Torpedo and Mines
• Integration of weapons and sensors
and Ships
Communication & Electronic Warfare Systems.
• Satellite Based Mobile Comm.
• Design & Development of RWR SIGINT and EW Systems
• Super Conducting Technologies
• Micro-Maching Technologies
• EW Systems
Mechatronics and Computational Fluid Dynamics
• Development of quick-to-run technologies empirical codes
• Development of all aero-thermodynamic work including design of ablataive shields and nozzle protection
• Design & Development of Unmanned Aviation and ground Vehicles
• Internal & External Flow Simulations
• Geo-Physical Technologies
• Gravity Modeling
• Development of 3-D Navier-Stokes Solvers, Pre-Processors for Grid Generation and Post-Processors for Visualization
32
Encryptology and
Computer Security • Encryption of voice and data
for various types of radio and non radio equipment over different frequency bands
• Encryption of Graphical/Synthetic Data used in C3 Systems and Networking Environment
• Cryptographic Algorithms/Software
• Hardware Development FPGA and Systems Integration
Propulsion Systems • Study and Design of Turbo Engines including gas generators
• Development of Air-breathing engines
• Underwater propulsion systems
• Manufacture/Fabrication of propulsion systems
Satellite Launch Vehicle (SLV)
• SLVs for EW/met/earth observing satellite
• SLV for multipurpose satellite
• SLV for geo stationary and multi-orbit satellite
AHUTA RESEARCH LABORATORY (KRL)
GOALS TECHNOLOGY AREA Phase-I (2005-2010) Phase-II (2010-
2015) Phase-III (2015-2020)
Materials • Alloyed structural Steels, High Strength – Low Alloy Steels
• Austenitic, Martensitic and Ferritic Stainless Steels
• Non ferrous Metal Production like Ni, Cu, Al, Mg, Zn, Brass, Gun Metals and Bronze etc
• Die & Tool Steels
• Micro-alloyed steels
• Precipitation Hardening and Duplex Stainless Steels
• Nickel & Nickel based Alloys
• Amorphous alloys
• Aluminium Bronzes
• Nuclear Reactor Materials
• Ceramics & Glasses for Optical and Guidance Applications
• Composites (MMCs, CMCs and Ablative Materials
• Shape Memory Alloys
• Piezoelectric Materials
• Intermetallics
• Titanium Aluminides
• Iron Aluminides
• Aluminum-Lithium Alloys
• Aluminum-Titanium-Vanadium Alloys
• Production of Ti and Beryllium Alloys
• Cooper Beryllium Alloys
• Purpose Built Materials like Electronic, Magnetic, Optical and Opto electronic Ceramic Materials.
• Functionally Gradient Materials
• Nano-structured, Nano-composites and Multi
• Intelligent Materials
• Biomedical Materials
Processing • Casting, Forgoing and Extrusion of Ferrous, Non-Ferrous Alloy pipes, rods and
• Near Net Shape forming Joining of Dissimilar Materials
• Programmable Assemblies, Micro and Nano Machining technologies
33
slabs etc
• Structure-Property Relations • Surface Engineering,
Multi-layer coatings and Chips formation
Structures • Offshore and Conentional Structure Systems
• High Performance Structures (Hypersonic and Extreme Temperature Applications)
• Advanced Crash Survival Structures for (Automobiles, Aerospace and Helicopters)
• Structural systems for Medical Applications
• Intelligent Adaptive Structures.
• Optimum Design using virtual reality models
• Real Time Simulation
SUPARCO
GOALS Technology Area
Phase-I (2005-2010) Phase-II (2010-2015)
Phase-III (2015-2020)
1 Satellites • Satellites for EW
• Metrological satellite
• Earth ovserving satellite
• Multipurpose Satellite
• Geo stationary and multi orbit satellites
34
PAKISTAN AERONAUTICAL COMPLEX (PAC)
GOALS Technology Area
Phase-I (2005-2010) Phase-II (2010-2015)
Phase-III (2015-2020)
1 General purpose Aircraft for Military & Commercial Applications.
• Design, Development and Manufacturing of 4-seater Aircraft.
• Joint production of JF-17 Aircraft
• Composite materials facility.
• Enhancement and up-gradation of core technologies related to aviation industry.
• Real Time embedded System
• Design, Develop and manufacture of a small treansport Aircraft.
• Design a fourth generation multi-role fighter Aircraft in collaboration with friendly countries.
• Acquisition of Thermal Imaging Technology.
• Design, development and manufacture of transport and cargo Aircrafts.
• Development of fourth generation multi-role fighter Aircraft.
• Development of new software’s for airborne systems
2 Aircraft Maintenance
• Overhauling country facility for C-130 Aircraft.
• Overhauling facility of Garrett Engine.
• Upgradation of facilities to conduct 4th level maintenance of future Aircraft.
3 EW & Radars* • Microwave repair and testing facility upto 18 GHz
• Design & Development of Airborne Radars.
• Technologies also being developed at NESCOM.
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