In principle, one can endorse that the present economic managers want to focus on the right area of the economy: Increasing exports. To achieve this one comes across a number of proposals, as elementary as facilitating the exporters to the rather complex initiative of re-negotiating all bilateral trade deals where Pakistan seems to be at a disadvantage. However, the trouble is that unless we can first create export surplus the other steps – even though good - will just be meaningless. Pakistan’s manufacturing sector for quite some time now has been grappling with the impact of high cost of production and unfriendly government policies, resulting not only in closure of the installed capacity, but also in failing to attract fresh investment to create new jobs. Adding new factories and manufacturing has simply been unviable of late and arresting this de-industrialisation in the economy will be the key for PTI to deliver on its promise of increasing exports. Actually, Pakistan is not the only example where poor governmental vision let the manufacturing slip. There is also a great deal of realisation today in the West, especially the United States, where Trump’s policies are geared around returning the American Industry to its glory days. The beauty of such an endeavour is that it is a double whammy: as the home industry develops not only are new jobs created, but also the dependency on imports automatically gets reduced.

However, the real inspiration on the ‘return-to-manufacturing’ initiative comes from China. Surprised, as China is already hailed by far the largest global engine of industrial production? Don’t be, because the Chinese always think beyond the present – “Only he who keeps his eye fixed on the far horizon will find success. Vision and action go together.” ~ Confucius. So what exactly are the Chinese planning anew now? Answer: Despite supporting almost half of world’s production facilities on output weight age basis, China has unleashed its 2025 vision with not only a renewed emphasis on industry, but what they are officially calling “Return of Industrial Policy”; as if they are at present not satisfied with their current industrial strength! The 2025 Made in China policy was released in 2015, and the preamble of its blueprint reads as follows: “Since the beginning of industrial civilisation, it has been proven repeatedly by the rise and fall of world powers, that without strong manufacturing, there is no national prosperity.” Implicit in the plan is the idea that the world is in the middle of a Fourth Industrial Revolution where technology and automation will play a key role. In the view of China’s industrial planners, domestic factories may be large but not yet ‘strong’. By attempting to gain an edge in new technologies and integrating them into the manufacturing supply chain, China 2025 aims to retain the existing capacities and at the same time add to the same by capturing the value added and high-tech products’ international markets. While within China there is a complete on-going shift of basic labor intensive industries from its East to the West Coast – a move that will not only take advantage of the new OBOR (One Belt One Road) routes being created in different countries (Pakistan included), but will also be instrumental in eradicating poverty cum raising the living standards of its comparatively less well-off Western population – the overall industrial plan is to in addition identify 10 key sectors that will be the targets of the new modern China in order to gain an even more enhanced share of the total global industry.

These sectors being: Advanced information technology; Digitally controlled machine tools & robotics; Airplanes; Ocean equipment and shipping; Rail-transportation equipment; Agricultural equipment; New materials; and Biopharmaceuticals and medical equipment. The aim being, to boost research and development and the production capacity, in all these sectors, to ultimately displace the foreign components with the domestic ones. Add this up, and it is the most ambitious attempted market grab the world has ever seen.

What is interesting in these modern times post 2008 financial crisis, is that China’s industrial planning is not too dissimilar to other global manufacturing powerhouses. Japan’s rise to dominance in industries from automobiles to home electronics would not have happened without the strategic vision of its industrial planners at the Ministry of International Trade and Industry and today like China, the Japanese economic managers are talking about a fresh new wave or push to regain some of the lost Japanese space in manufacturing. Likewise, we are already witnessing a very protectionist mindset emerging from the US and Europe that is funnelling enhanced public funding to shore up respective industrial competitiveness. In essence, we see that even for the most developed economies the scale of government support can be crucial between success and failure. With committed direct investments from the centre, the local governments, State owned banks, and existing State enterprises, the ownership of China 2025 is extraordinarily strong. Just in 2 years, 2016-17, Chinese banks funded local companies to undertake mergers & acquisitions (M&A of non-Chinese companies) amounting to $40 billion in the technology sector alone. The Chinese Ministry of Industry and Information Technology by itself has placed $1.5 billion at the disposal of Chinese entrepreneurs to simply locate, explore and negotiate potential M&A – i.e. success at any cost, even if it has to be bought! While all this is surely great for China, it obviously is a cause for concern for its trading partners (Pakistan being one of them). And going by these developments, the lessons for us are primarily two: a) Unless we can timely put our safeguards in place, China’s east to west industrial swing can adversely affect our domestic manufacturing, and b) Pakistan needs to devise its own industrial vision that visibly promotes “Made in Pakistan” – the share of ‘domestic manufacturing’ in Pakistan’s economy, as we know, already stands reduced to 17% of GDP from being about 20% of GDP in 2005; by the way in the late 60s & early 70s it was estimated at around 35%. More importantly, without a clear national industrial vision that out-rightly supports home manufacturing and without a strong governmental backing, any meaningful Industrial revival in Pakistan will only remain a pipe-dream.

 

The writer is an entrepreneur and economic analyst.

 kamal.monnoo@gmail.com