Daily Times

Is Pakistani industry looking up despite continuing hurdles and hardships? A word of cheer: industry is looking up. The data of industrial output for the first seven months to January of the current fiscal (FY) 2011, indicates a positive turn of business for large scale manufacturing (LSM) industry. This is despite the new hurdle that oil prices are surging in the wake of the North Africa-Middle East turmoil.

The output of the LSM sector turned positive to the extent of 1.03 percent in seven months to January 2011 — a far cry from an actual decline of 1.77 percent during the like period of FY 2010, the State Bank of Pakistan (SBP) the central bank, reports. The quantum index number of LSM industries rose to 200.63 points during July-January 2011, compared to 198.59 points in the like period of 2010. The latest return to LSM growth this year is spearheaded by textiles, autos, chemicals, leather and electronics.

The ongoing North Africa-Middle East troubles are not only driving up the price of imported commodities, including food, but are seen as hitting exports quite hard.

It can, in fact, negatively impact industrial output, business turnover and the economy as a whole.

Alongside these new external factors, Pakistan is still undergoing one of its worst energy crises, taxes are rising, the budget deficit has widened and the government continues to be blamed for its failure to curb lawlessness, including criminals directly hitting industry and business.

The key sector of textiles, which has the biggest weight in the LSM basket, led the pack and came up with “a strong recovery” as its output turned from “a decline to a positive growth”, the SBP says. Textiles, enjoying a 32.6 percent weight in the overall LSM basket, rose 0.6 percent in the seven month period — up from a minus 2.0 percent in the like period of 2010.

Pakistani auto output was up 16.8 percent but this industry failed to match its 51.8 percent growth in the same period last year. But demand is rising. The growing electronics industry rose 6.2 percent on the back of higher consumer demand, compared to a 2.3 percent growth last year. Chemicals recovered significantly and recorded a 3.5 percent growth — up from 0.6 percent in the like period of FY 2010. The leather sector, including leather garments, was 14.2 percent — up from 9.1 percent in the same period last year. The food and beverages sector, which has a 19.1 percent weight in the LSM basket, was minus 2.0 percent. Its performance actually improved because the negative growth of the sector in FY 2010 was 8.5 percent.

The expanding pharmaceutical industry matched its growth of 5.7 percent this year, which was the same in the like period of last year. Unhappily, fertiliser output was minus 7.2 percent, compared to 5.3 percent last year. The sector has a weight of 4.5 in the LSM index.

The latest recovery, mainly, took place in January. The performance of the first six months of FY 2011 — July to December too was poor as the overall LSM output growth was negative. The growth turned positive in January 2011 alone, according to the SBP.

This positive development notwithstanding, the question now is whether LSM growth for the whole of FY 2011 will be able to match or exceed the actual growth of 2.34 percent in the whole of FY 2010. The economy can grow 2.5 percent this year. Will the LSM sector record a similar growth, exceed it or stay stunted?

One should listen to the finance boss, Finance Minister Abdul Hafeez Shaikh, when he says, “The government is trying to stabilise the economy and pursue its reforms agenda despite the shocks of this summer’s unprecedented floods and rising oil prices.” Pakistan’s GDP growth was affected to the extent of 2.0-2.5 percent because of the floods. In monetary terms, the damage was $ 10 billion, he says. In spite of this, the finance minister is upbeat over prospects for the recovery, growth and expansion of the LSM sector.

The writer is an Islamabad-based journalist and former Director General of APP