INDUSTRIAL REFORMS. Mr. Liaquat Ali Jatoi MINISTER FOR INDUSTRIES & PRODUCTION PRESENTATION BY

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1 INDUSTRIAL REFORMS PRESENTATION BY Mr. Liaquat Ali Jatoi MINISTER FOR INDUSTRIES & PRODUCTION Pakistan Development Forum Meeting May, 2003

2 Current Industrial Scenario

3 Manufacturing Industry s Contribution to GDP % age Target YEAR Target % CONTRIBUTION

4 Current Industrial Development Direction CURRENT POLICY PHASE ( ) SHIFT TO GROWTH LED INDUSTRIALIZATION ENCOMPASSING IMPORT SUBSTITUTION AND EXPORT ORIENTATION CONTINUATION OF INDIGENIZATION / DELETION POLICY AIMING SELF SUSTENANCE EMPHASIS ON DEVELOPMENT OF SMEs INCLUDING CLUSTER DEVELOPMENT TARIFF RATIONALIZATION TO MAKE LOCAL INDUSTRY INTERNATIONALLY COMPETITIVE AND PROMOTE VALUE ADDITION REDUCING CONTROLS AND RATIONALIZING REGULATORY FRAMEWORK DEVELOPMENT OF SECTORAL VISIONS/ STRATEGIES TO IDENTIFY AREAS WHERE PAKISTAN HAS OR CAN DEVELOP A COMPETITIVE EDGE

5 Reforms Undertaken by the Government

6 Industrial Policy Formulation PRIORITIZING THE KEY SECTORS STRENGTH, WEAKNESSES, OPPORTUNITIES & THREATS (SWOT) ANALYSIS IDENTIFICATION OF IMPORTANT SECTORS ACCORDING TO THE NATIONAL PRIORITIES PROVIDING:! EMPLOYMENT GENERATION! EXPORT EARNINGS! HIGHER GROWTH

7 Industrial Policy Formulation TEXTILE VISION 2005 ENGINEERING VISION 2010 LEATHER OUTLOOK 2010 FERTILIZER POLICY 2001 UNDER PREPARATION CHEMICAL VISION OVERALL INDUSTRIAL VISION PESTICIDE POLICY

8 PHASE 1 TOP RATES OF CUSTOM DUTIES REDUCED FROM 35% TO 30% TARIFF STRUCTURE RE-ARRANGED BY 5%, 10%, 20% AND 30% CENTRAL EXCISE DUTIES WITHDRAWN FROM NUMBER OF ITEMS AND RATES WERE RATIONALIZED AT IMPORT AND DOMESTIC STAGES PHASE 2 Tariff Rationalization MAXIMUM TARIFFS WERE AGAIN BROUGHT DOWN FROM 30% TO 25% AND MAINTAIN THE MINIMUM ONE OF 5% NUMBER OF SROs HAVE ALSO BEEN REDUCED

9 Investment Promotion OPENING UP OF MAJOR SECTORS TO FOREIGN INVESTMENT THROUGH POLICY INCENTIVES. DEVELOPING EXPORT PROCESSING ZONES IN MAJOR CITIES OF PAKISTAN. GOVERNMENT TAKING INITIATIVE ON REDUCING THE COST OF DOING BUSINESS IN PAKISTAN.

10 Industrial Growth Enhancement MAJOR FOCUS ON STRATEGIC AREAS OF : VALUE ADDITION PRODUCTIVITY ENHANCEMENT QUALITY IMPROVEMENT SME DEVELOPMENT TECHNOLOGICAL UPGRADATION ---- Contd.

11 Investment Promotion VALUE ADDITION FOCUS ON TEXTILE & ENGINEERING SECTOR REDUCE DUTY ON PLANT, MACHINERY & EQUIPMENT FOR THE ABOVE SECTORS TO 5% PRODUCTIVITY ENHANCEMENT NPO REVIVED AND MORE PRODUCTIVITY ORIENTED NPO INITIATED VARIOUS PROGRAMS TO CREATE PRODUCTIVITY AWARENESS CONSCIOUSNESS AT GRASS ROOT LEVEL ---- Contd.

12 Investment Promotion PRODUCTIVITY ENHANCEMENT APPROPRIATE USE OF TRAINING FACILITIES OFFERED BY APO COUNTRIES. BENCHMARKING STUDIES INITIATED ON SPINNING SECTOR TO IDENTIFY WEAK AREAS OF VALUE ADDITION AND WASTE REDUCTION. QUALITY IMPROVEMENT MOI&P AND MOST JOINTLY DECIDED TO ADOPT ISO STANDARDS AS PAKISTAN STANDARDS. ALL IMPORTS ARE NOW SUBJECT TO ISO STANDARDS ---- Contd.

13 Investment Promotion SME DEVELOPMENT ROLE OF SMEDA STRENGTHENED TO:! PROVIDE ACCESS TO AFFORDABLE CREDIT! IDENTIFY SME CLUSTERS! PROVIDE PACKAGE OF SERVICES! UPGRADE THIN TECHNOLOGY! HUMAN RESOURCE DEVELOPMENT TASK FORCE ESTABLISHED COMPRISING INVESTMENT WING OF MOI&P, SMEDA, SME BANK AND PIDC FOR FACILITATION OF LOOM SECTOR IT HAS BEEN DECIDED TO REPLACE OLD LOOMS WITH SHUTTLE-LESS POWER LOOMS ---- Contd.

14 Investment Promotion SME DEVELOPMENT STATE BANK OF PAKISTAN UPON RECOMMENDATION OF MOI&P AGREED THAT THE LMM FACILITY BE REDUCED FROM 11% TO 10% FOR LOOM SECTOR IT IS ESTIMATED THAT THERE WILL BE AN INVESTMENT OF Rs. 10 BILLION WHICH IS LIKELY TO GIVE AN IMPETUS OF Rs. 60 BILLION TO THE ECONOMY COMMON FACILITY CENTERS ESTABLISHED FOR SMEs SMEDA HAS PREPARED MORE THAN 100 PRE- FEASIBILITY STUDIES ON DIFFERENT SECTORS OF SMEs MOI&P INITIATED CLUSTER DEVELOPMENT IN EXPORT TRIANGLE REGION OF GUJRAT, GUJRANWALA AND SIALKOT ---- Contd.

15 Investment Promotion TECHNOLOGICAL UPGRADATION THREE TECHNICAL CENTRES BEING UPGRADED THROUGH JAPANESE GRANT:! PITAC! PLASTIC TECHNOLOGY CENTRE! VENDOR DEVELOPMENT CENTRE 100 TECHNICAL ASSISTANCE CENTRES PROPOSED TO BE SETUP BY MOST 25 SHORT TERM FOR ENGG SECTOR 25 MEDIUM TERM FOR ALL SECTORS 50 LONG TERM FOR ALL SECTORS

16 Market Expansion MAJOR THRUST ON ON GROWTH-BASE STRATEGY COVERING:! IMPORT SUBSTITUTION! EXPORT LED LED GROWTH! ELIMINATION OF OF SMUGGLING CONSUMER FINANCING SCHEME FOR FOR MARKET EXPANSION ANNOUNCED SCHEME IS IS PROPOSED TO TO BE BE EXTENDED TO TO GOVERNMENT/PUBLIC SECTOR THROUGH SECURED GUARANTEES AGAINST GRATUITY/PROVIDENT FUND FOR FOR LEASING TRANSPORT & DOMESTIC EQUIPMENT ---- Contd.

17 Market Expansion FOLLOWING POTENTIAL ATTENTION STARVED CITIES HAVE BEEN IDENTIFIED FOR A COMPREHENSIVE PROGRAM ON MARKET EXPANSION:! D.I. KHAN (NWFP)! SUKKUR (SIDH)! MIRPUR (AK)! GILGIT (NA)! GWADAR (BALOCHISTAN)

18 New Ordinances/Laws INDUSTRY RELATED LAWS WERE REVISED & IMPROVED TO MAKE THEM BUSINESS FRIENDLY ANTIDUMPING ORDINANCE 2000, SUBSIDIES & COUNTERVAILING ORDINANCE 2001, SAFEGUARD ORDINANCE 2002 THE PATENT ORDINANCE 2000/ 2002 THE REGISTERED DESIGN ORDINANCE 2000 THE REGISTERED LAYOUT-DESIGNS OF INTEGRATED CIRCUITS ORDINANCE 2000 THE EXPLOSIVES (AMENDMENT) ORDINANCE 2002 THE BOILERS AND PRESSURE VESSELS ORDINANCE 2002 (APPROVED) INTRODUCTION OF FOREIGN PRIVATE INVESTMENT PROMOTION IN PROTECTION ACT 1976 AND PROTECTION OF ECONOMIC REFORMS ACT 1992.

19 Indigenization through Deletion Programs DUE TO INDIGENIZATION PROGRAM COUNTRY HAS BEEN ABLE TO SAVE HUGE FOREIGN EXCHANGE. IN AUTOMOBILE SECTOR ALONE, ANNUAL FOREIGN EXCHANGE SAVING HAS REACHED OVER US$ 700 MILLION ANNUALLY. IMPORT SUBSTITUTION OF US$1,255 MILLION

20 Reorganization/Restructuring of Support Organizations EAC Experts Advisory Cell NPO National Productivity Organization SMEDA Small & Medium Enterprise Development Authority EPZA Export Processing Zones Authority TCO Textile Commissioner Organization OTHER INDUSTRIAL SUPPORT DEPARMENTS AND R&D ORGANIZATIONS

21 Achievements CONTRIBUTION OF MANUFACTURING SECTOR IN GDP WHICH WAS STAGNENT AT 17% WAS INCREASED TO 17.7% DURING AND THE TARGET FOR IS FIXED TO 18.2% WHICH IS LIKELY TO BE ACHIEVED. FDI DURING JULY-MARCH, 2003 INCREASED TO US$ 658 MILLION AGAINST US$ 287 MILLION SAME PERIOD LAST YEAR. ENGINEERING GOODS EXPORTS INCREASED BY 43% (JUL- MAR ) INVESTMENT IN TEXTILE SECTOR-US$ 1.4 BILLION (3 yrs) ---- Contd.

22 Achievements INVESTMENT IN AUTO & ENGINEERING SECTOR Rs BIL. CERAMIC SECTOR DOUBLING ITS CAPACITY GROWTH IN AUTOMOLILE SECTOR OVER 60% IN 2 YEARS PRICES OF SMALL CARS REDUCED BY ABOUT 10% KOREAN AND EUROPEAN CARS INTRODUCED SALES PRICES DECREASED FOR ELECTRICAL APPLIANCES INDIDENIZATION PROGRAMME ANNUAL SAVING OF US$700 MIL. ONLY IN AUTO SECTOR 21 SECTORS SHOWED DOUBLE DIGIT GROWTH PAKISTAN STEEL TURN AROUND

23 Future Outlook

24 Future Outlook PREPARATION FOR POST WTO SCENARIO BY MAKING OUR PRODUCTS INTERNATIONALLY COMPETITIVE SHARE OF MANUFACTURING SECTOR TO BE 25% OF GDP BY YEAR 2010 AND GRADUALLY MOVE TO 30% IN FUTURE SHARE OF ENGINEERING GOODS TO GROW TO 30% OF MANUFACTURING IN 10 YEARS PER CAPITA INCOME OF $1000 BY YEAR Contd.

25 Future Outlook (Line of Action) FOR RAPID INDUSTRIAL GROWTH EMPHASIS REQUIRED ON:! AGRICULTURE: FARM PRODUCTIVITY, LAND LEVELING, INCREASING YIELD! CONSTRUCTION: PROVIDE HOUSE LOANS AT A LARGER SCALE (PRESENT SHORTFALL FOR 5 MILLION HOUSES)! MARKET EXPANSION THROUGH CONSUMER FINANCING! TECHNOLOGICAL UP GRADATION! TECHNICAL MANPOWER DEVELOPMENT! APPROPRIATE INFRASTRUCTURE (PHYSICAL, FINANCIAL, TECHNICAL AND INTELLECTUAL) ---- Contd.

26 Future Outlook FACILITATING TRIPARTITE ARRANGEMENT AMONG INVESTORS, TECHNOLOGY SUPPLIERS AND LOCAL PARTNERS ENCOURAGE PUBLIC-PRIVATE SECTOR PARTNERSHIP TO SET UP PROPER EPZs / INDUSTRIAL ESTATES THROUGHOUT THE COUNTRY. CLUSTER DEVELOPMENT PARTICULAR FOR AREAS LIKE GUJRANWALA, SIALKOT, WAZIRABAD, HYDERABAD ETC. DEVELOP STRATEGICALLY POTENTIAL AREAS LIKE PESHAWAR, GAWADAR, THAR COAL ETC. ESTABLISH LARGE INDUSTRIAL COMPLEXES WITH FORWARD AND BACKWARD LINKAGES (INTEGRATED APPROACH)