D. Art Silk and Synthetic Weaving Industry
The Art Silk and Synthetic Weaving Industry is mainly cottage industry and based on power looms units comprising of 8 to 10 looms. There are approximately 90,000 power looms in operation to prepare yarn in the country. About 30,000 looms are engaged in production of blended yarn and 60,000 looms are producing filament yarn. The export of synthetic textile increased by 17.2 percent in terms of quantity and 10.7 percent in terms of value during July-March 1999-2000 over the comparable period of last year.

Jute Industry
There are 12 Jute mills in the country with an installed capacity of 38894 spindles and 2124 looms. Two of these units are closed due to shrinking demand of jute goods in the country. The main products of the Jute Industry are jute sacks and hessian cloths used for packing. The production of jute goods decreased by 9.3 percent in July-March 1999-2000 over the corresponding period of last year by moving to 57.3 thousand tonnes this year from 63.2 thousand tonnes in the comparable period of last year.

Fertilizer Industry
There are 10 fertilizer units operating in the country (Punjab 6, Sindh 2 and NWFP 2) with an installed capacity of 4,651.6 thousand tonnes. Out of these 10 units, four units having capacity of 2,721 thousand tonnes are in the private sector and 6 units having 1,930 thousand tonnes capacity are in public sector. The production of fertilizers has increased by 10.5 percent and stood at 3664.0 thousand tonnes during July-March 1999-2000 as against 3046.6 thousand tonnes in the comparable period of last year. The production of fertilizers like urea and ammonium nitrate increased by 6.4 percent and 26.7 percent respectively, while the production of nitro phosphate declined by 7.1 percent during July-March 1999-2000 over corresponding period of last year.

Vegetable Ghee
There are 166 units producing vegetable ghee and cooking oil with an installed capacity of around 2.7 million tonnes. Against this capacity, 1.2/1.5 million tonnes of vegetable ghee/cooking oil is being produced to meet annual national requirement of about 1.4 million tonnes. The units under Ghee Corporation of Pakistan are now in the final stages of privatization and major production activity is concentrated in the private sector.

The production of vegetable ghee declined marginally to 620 thousand tonnes in July-March 1999-2000 against actual production of 626 thousand tonnes in the comparable period of last year which implies a marginal decline of 0.9 percent. The production of cooking oil also witnessed decline of 6.2 percent and stood at 71 thousand tonnes for July-March 1999-2000 against 76 thousand tonnes in the corresponding period of last year.

Sugar Industry
There are 78 sugar mills working in the country of which 40 are in Punjab, 32 in Sindh and 6 in NWFP having an installed capacity of 5.0 million tonnes sugar production. The sugar industry always played havoc with the Quantum Index of Manufacturing (QIM) due to the large weight assigned to it. The steep decline in production of sugar in 1999-2000 after touching highest ever production mark in 1998-99, blunted the impressive recovery of the large-scale manufacturing.

The total production of sugar during July-March 1999-2000 declined to 2.4 million tonnes as compared to 3.2 million tonnes of the comparable period of last year sugar produced in July-March 1998-99, showing massive decline of 24 percent. The fall in domestic availability of sugar necessitated import of sugar this season. The fall in production is mainly attributed to shrinkage in area under cultivation and yield of sugarcane.

Cement
The cement industry passed through a difficult period due to contraction of demand for the product. The lesser demand is attributed to contraction of the construction sector activities. The fall in public sector development programme (PSDP) has a direct bearing on the demand for cement because it was the major consumer for the product. There are 25 cement units in the country with total installed capacity of 16300 thousand tonnes. Out of these 25 units, 4 units with installed capacity of 1831 thousand tonnes are in public sector and 21 units having capacity of 14,440 thousand tonnes are in the private sector. The total production of cement is recorded at 7.0 million tonnes during July-March 1999-2000 as compared to 6.9 million tonnes in the same period last year, showing a marginal increase of 1.3 percent.

Automobile Industry
The automobile industry also experienced a fall in production this year. Larger decline is witnessed in jeeps and cars industry (23.5 percent), trucks (6.7 percent) and LCVs (43.2 percent) while the production of tractors and buses increased by 53.9 percent and 51.2 percent respectively, in the period July-March 1999-2000. The production of motorcycle also exhibited decline of 3.8 percent in the same period. The automobile industry enjoys the status of the most protected industry in Pakistan where the effective protection rate (EPR) ranges between 701 percent to over 5000 percent.

Public Sector Industries
The overall share of the public sector in the large-scale manufacturing has declined considerably over the years. At present, the Ministry of Industries & Production division controls nine holding corporation (including Ghee Corporation of Pakistan) with 41 industrial units in their administrative control. The number of units has substantially declined since initiation of privatization in 1991 from 101 to 41 units. The performance of these units is summarized in Table 3.5 A and 3.5 B.

Table 3.5 A
Performance of Public Sector Industries
(Excluding Pak Steel & GCP)

(Rs. In Million)

* At constant prices of 1987-88.
Source: Expert Advisory Cell, Ministry of Industry & Production

Table 3.5 B
Performance of Public Sector Industries
(Overall)
(Rs. In Million)

* At constant prices of 1987-88.
Source: Expert Advisory Cell, Ministry of Industry & Production

Production Value
The production value (at constant prices of 1987-88) of all industrial units under administrative control of the Ministry of Industries is projected to increase by 7 percent in the current fiscal year over the production value of last year. The major contributors in this increase are State Engineering Corporation (SEC) (the production value increased by 39.3 percent), Pakistan Automobile Corporation (PACO) (15 percent) and National Fertilizer Corporation (NFC) (9 percent). On the other hand, two corporations namely Pakistan Industrial Development Corporation (PIDC) and State Cement Corporation of Pakistan (SCCP) showed a decline in production value by 54 and 18 percent respectively. Federal Chemical & Ceramics Corporation (FCCCL) has reported nil production due to closure of the only unit i.e. Ravi Rayon. The State Petroleum Refining & Petro-Chemical Corporation (PERAC) has handed over its only unit, National Refinery Ltd. (NRL), to the Ministry of Petroleum and came out of production activity.

Net Sales
Net Sales of state controlled industrial units excluding Pakistan Steel is likely to increase by 12.7 percent by the end of the current fiscal year. The individual corporation, which depicted increase in net sales include National Fertilizer Corporation (NFC) (11 percent), PACO (39 percent) and SEC (40 percent). The decline was visible in PIDC (50 percent) and SCCP (5 percent).

Pre-Tax Profit/ (Loss)
An aggregate loss of Rs.4 million is expected by the end of June in Public sector corporations as against an aggregate profit of Rs.1529 million recorded last year. Only three corporations namely, NFC, PACO and PERAC are expected to show profit in this year while remaining are expected to incur losses. The SEC is likely to minimize its loss by Rs.307 million and PIDC by Rs.131 million. The profit of the NFC is likely to be lower to Rs.1065 million from Rs.3334 million, thereby, showing a 68 percent decline in profit. The decline is attributed to increase in prices of inputs like natural gas and decrease in sales prices due to government’s policy to lower the burden of cultivators.

Payment of Taxes and Duties
The public sector corporations are expected to pay Rs.4371 million as taxes and duties during 1999-2000, which is higher by 46.9 percent over the taxes and duties paid during the last fiscal year. The increase is due to 207 percent higher tax and duty payments during the current fiscal year by the NFC.

Employment
The total employment provision in the public sector industries is likely to decline from 14213 employees to 11065 employees by end June 2000. All corporations have observed decline in employment. Major lay-off is expected in the PIDC, SCCP and PACO.

Performance of Pakistan Steel
Pakistan Steel was launched with the aim to provide basic raw material to high-tech industries in the country. The installed capacity of 1.1 million tonnes of raw steel is extendable up to 3 million tonnes. The main products of Pakistan Steel are coke, pig iron, billets, hot rolled coils/ sheets, galvanized sheets etc. The re-structuring of Pakistan Steel is under active consideration of the government. The performance of Pakistan Steel is summarized in Table 3.6.

Source: Expert Advisory Cell, M/O of Industry & Production.
*At constant prices of 1987-88.

Pakistan Steel has been making promotional efforts for the establishment of downstream industries in the private sector for optimum utilization of its production. So far, as many as 30 downstream units have been come-up on production stream.

Industrial Investment
The provisional estimates of industrial investment or gross capital formation in the manufacturing sector witnessed a healthy increase of 20.4 percent during 1999-2000. The majority of this growth came from the private sector while public sector also exhibited marginal increase in industrial investment. The private sector investment in large-scale manufacturing registered a sharp increase of 30.6 percent during the course of year while public sector investment recorded a marginal increase of 0.6 percent growth. The small-scale manufacturing is fully dominated by the private sector. Almost entire investment in small-scale has come from the private sector.

The healthy trend in the manufacturing sector has enhanced private sector activity. The impressive increase in private sector investment is not fully reflected in the growth performance of this sector mainly due to a massive decline in sugar production. The details of industrial investment are given in Table 3.7

Source: Federal Bureau of Statistics

Profile Of Small-Scale Industries
It is generally recognized that economic growth of the developing countries crucially depends on development of small and medium enterprises (SMEs). It provides employment at lesser cost and its capital requirement is also low. It provides 80 percent of employment in manufacturing sector and generates one fourth of the export earnings.

The growth of small-scale industry is mainly hampered by the non-availability of credit facility. Realizing this constraint, the government has decided to open a micro-credit bank, which is expected to be operational from July 2000. Small and Medium Enterprises Development Authority (SMEDA) has been reinvigorated and re-organized to provide technical assistance to potential small investors. In the provinces following organizations are involved in promotion of small and medium industries:
i) Punjab Small Industries Corporation
ii) Sindh Small Industries Corporation
iii) NWFP Small Industries Development Board
iv) The Directorate of Small Industries Balochistan

Deletion Policy
The deletion policy of different products of engineering industry was formulated in 1980 with a view to save foreign exchange, provide job opportunities, ensure transfer of technology, and development of engineering base in the country. The engineering industries sanctioned under this programme, were allowed to avail concessionary rate of duty for the import of components/sub-components and raw material to promote indiginization. The deletion policy was further reviewed in 1995 and is under implementation with higher degree of transparency. The Industry Specific Deletion Programme (ISDP) for progressive manufacturing of Deep Freezer, Motorcycles and Tractors have also been prepared during 1998-99 and CBR has been asked for implementation accordingly.

The deletion policy has attracted investment in many joint ventures and technical collaboration for local manufacturing in the country. Some industries have obtained quality certification like ISO 9002 and some are on the road of obtaining quality standards. Many industries have succeeded in export of parts/components. The varying degree of deletion achievement with technology transfer in some major products are given below:

Privatization Programme
The ambitious privatization programme was launched in 1991 in order to minimize the governments’ role in commercial activities. Successive governments have attached high priority to the privatization process as a pivotal feature of their dynamic policies for restructuring and revitalizing the national economy. So far 103 units have been privatized. The process of privatization slowed since 1994 mainly due to litigation and structural problems in the process. The present government has taken several measures to implement the privatisation programme speedily and judiciously. The salient features of this programme are as under:

(i) A comprehensive privatisation programme for the short, medium and long term has been prepared in full conformity with the economic and investment environment.

(ii) Regulatory institutions are to be strengthened and initially a Natural Gas Regulatory Authority (GRA) has recently been created.

(iii) The new privatisation law has incorporated generalized processes and standards of performance to make the bidding process more transparent and speedy.

(iv) The short-term programme is spread over eight months (ending December 31, 2000), during which there would be enlistment of selected State Owned Entities (SOEs) on the stock exchanges such as National Bank of Pakistan, Habib Bank and United Bank for divestment of minority share-holding in larger entities through public offer or private placements. The short-term program will also focus on the immediate divestment/ liquidation of small industrial units, which do not have competitive ability.

(v) The work would be ignited for the effective corporatisation and restructuring of major SOEs, such as Banks, utilities etc. to prepare them for divestment in the medium-term.

(vi) In the medium-term (by June 2002), major transactions in the banking and finance, power, oil and gas, telecommunication and industrial sectors would be undertaken.

(vii) In the long-term (beyond June 2002), remaining entities in the financial, insurance, utilities and infrastructure sectors would be brought to the market for divestment.

FOREIGN INVESTMENT
In recent years, developing countries have become progressively more integrated with international financial and capital markets. The dramatic increase in private capital flows to developing countries since the late 1980’s, contributed to investment and growth in developing countries leading to the reduction of poverty and improvement in the living standards. The year 1998, however, witnessed enormous decline in the inflow of foreign investment in developing countries. Total net private capital inflows in 1998 to the emerging markets declined by 55 percent over 1997 level and about 70 percent over the peak level of 1996.

The fastest growing regions in the mid-1990s were East and South-East Asia and Latin America as most of the economies of these regions showed largest advances in integration with the world economy, as measured by either size of capital inflows or growth of exports. The Asian countries have established their role as the largest recipient of FDI during 1990-96. The success of Asian countries in attracting FDI lies in investment climate, characterized by growing markets and favourable regulatory framework.

The increase in FDI inflows to developing countries accounts for 44.4 percent of the average annual increase of global FDI flows during 1992-97. The FDI flows to developing countries increased manifold, rising from US $ 33.7 billion in 1990 to $ 172.9 billion in 1997. The trend was reversed in 1998 and the flow of FDI registered a decline of 4.0 percent to 165.9 billion.

Pakistan stands nowhere in attracting FDI in recent years. It accounted for 0.2 percent of World FDI flows, 0.5 percent of developing countries, less than one percent of Asia, and 16 percent of South Asian countries. Inspite of various incentive packages for foreign investors and removal of obstacles to foreign investment, Pakistan’s performance in attracting FDI has been lackluster at best. The trends in FDI by country and by economic groups are presented in Table 3.8 A and 3.8 B.