UNIDO 2020: Pakistan Industrial Output Lags Behind Peers in South Asia

Manufacturing in Pakistan lags behind Bangladesh, India and Sri Lanka in terms of manufacturing value added per capita as well as per capita exports of manufactured products, according to Competitive Industrial Performance Report 2020 released by United Nations Industrial Development Organization (UNIDO). 


Pakistan's Competitive Industrial Performance. Source: UNIDO



On the competitive Industrial Performance (CIP) Index, Pakistan ranks 82 among 152 countries, well behind India at 42, Bangladesh at 70 and Sri Lanka at 75. Only Maldives (144) and Nepal (135) rank lower than Pakistan. Bangladesh has built a very successful garments manufacturing and export business that rivals China's. The country is now focusing on building mobile phones and consumer electronics industry.  

India's Competitive Industrial Performance. Source: UNIDO


Only 1.3% of Pakistan's manufacturing is high-tech and 9% medium tech, better than Bangladesh's 0.4% high-tech and 1.5% medium tech, but considerably worse than India's 9.4% high tech and 25.4% medium tech. 

Bangladesh's Competitive Industrial Performance. Source: UNIDO

Nearly 40% of India's manufacturing output is based on locally extracted natural resources like iron ore and coal, much higher than Pakistan's 9.7% and Bangladesh's 1.9%. Pakistan's per capita manufactured exports add up to only $87 per capita, well behind Bangladesh $198 and India $208. Per capita manufactured output in Pakistan is $178 versus Bangladesh's $281 and India's $299. 

China's Competitive Industrial Performance. Source: UNIDO


The most successful example of a manufactured exports-driven economy in Asia is China, ranked number 2 in the world, just behind top-ranked Germany. China's per capita manufacturing value added is $2,726 and its per capita manufactured exports add up to $1,685. High-tech manufactured products account for 30.6% of Chinese manufacturing output while its resource-based manufacturing is just 9.3% of its output.

Pakistan's Manufacturing Output Trend Since 2000. Source: World Bank


Manufacturing industries are defined by the International Standard Industrial Classification (ISIC).  Value added is the net output of a sector after adding up all outputs and subtracting intermediate inputs. 


Here's Pakistan's manufacturing output in current U.S. dollars:

Pakistan manufacturing output for 2019 was $34.66B, a 9.57% decline from 2018. In 2018, it was $38.33B, a 4.88% increase from 2017. Pakistan manufacturing output for 2017 was $36.54B, a 8.56% increase from 2016. It was $33.66B in 2016, a 2.73% decline from 2015.

 
Pakistan Manufacturing Output Peer Ranking 2019. Source: World Bank

Pakistan’s overall exports have continued to lag behind those of its South Asian counterparts since the early 1990s. Bangladesh’s exports have increased by 6.2 times compared to Pakistan’s, measured in terms of exports per capita, and that of India by 6.8 times, according to Princeton's Pakistani-American economist Atif Mian. 


Pakistan's average economic growth of 5% a year has been faster than the global average since the 1960s, it has been slower than that that of its peers in East Asia. It has essentially been constrained by Pakistan recurring balance of payment (BOP) crises as explained by Thrilwal's Law. Pakistan has been forced to seek IMF bailouts 13 times in the last 70 years to deal with its BOP crises. This has happened in spite of the fact that remittances from overseas Pakistanis have grown 24X since year 2000. The best way for Pakistan to accelerate its growth beyond 5% is to boost its exports by investing in export-oriented manufacturing industries, and by incentivizing higher savings and investments.


Comments

Riaz Haq said…
#Motorcycle production boom in #Pakistan as #COVID19 #lockdown ends. 2.8 million motor vehicles were produced locally during fiscal year 2016-17, which increased to 3.22 million in 2017-18 with a little bit of decline recorded in 2018-19 to 2.86 million.
https://tribune.com.pk/story/2265823/motorcycle-production-booms-as-economy-recovers

Industry players expect production to increase around 800,000 units

The first quarter of the fiscal year 2021 is witnessing higher production of motorcycles as the economy recovers from the lockdown that had been imposed to contain the spread of Covid-19 pandemic.

“There is a boom in motorcycle industry of Pakistan,” said Association of Pakistan Motorcycle Assemblers (APMA) Chairman Muhammad Sabir Shaikh.

He added production of motorcycles will hopefully increase around 800,000 units after the current month ends.

Looking at the growing demand for the two-wheeler vehicle, Emerging Innovation - a bike manufacturing company - has set up a new production line for bikes called Revolt.

“We have set up the production plant with 99% deletion program; ie the company will use locally produced auto parts in the making of two-wheelers,” said the company’s country head Anwar Anees, adding, “The locally produced motorcycle will be 33% less costly with an increased fuel efficiency of 62-kilometre mileage.”

“Locally held research and development (R&D) for over two million markets with the aid of engineers from different local universities helped us achieve this efficiency,” said Anees.

Besides two-wheelers, demand for three-wheeler rickshaws and loaders has also increased due to which the company has applied for permission from the government to produce three-wheelers and hybrid electric bikes.

“It is commendable that new production lines are being set up,” said Provincial Minister for Industries and Trade Jam Ikramullah Dharijo. “New factories mean more jobs, which Pakistan is in dire need of at the moment.”

Bikes production in this venture may be the highest ever in the history of Pakistan, said Shaikh. “Sales of motorcycles are also breaking records.”

“However, motorcycles data reported by the media is not complete,” he highlighted.

He said that the data is mostly taken from Pakistan Automotive Manufacturers Association (PAMA), which has only five motorcycle producing members while around 40 companies are producing bikes in the country. Those companies are registered with the Engineering Development Board (EDB).

According to a report by EDB Electric Vehicle Policy 2020-25, two-wheelers and three-wheelers vehicles constitute a significant portion of Pakistan’s overall auto manufacturing.

A total of 2.8 million motor vehicles were produced locally during the fiscal year 2016-17, which increased to 3.22 million in 2017-18 with a little bit of decline recorded in 2018-19 to 2.86 million.

Out of 2.86 million vehicles manufactured in Pakistan, more than 2.4 million motorcycles were manufactured during the same period, said the report.
Imran Q. said…
Salams, I have been advising Hunar foundation in Pakistan. They are trying to uplift the skills needed for Plumbers, solar technicians HVAC etc. Your recent article about industrial output paints a not so good picture for Pakistan and one of the factors is skilled labour. Can you please share some research if any, about skills impacting industrial growth.
Riaz Haq said…
Imran: "Can you please share some research if any, about skills impacting industrial growth."

I think Pakistan lacks an overall industrial policy now... the kind of policy that drove Pakistan’s rapid industrial development in 1960s. By 1969, Pakistan’s manufactured exports were higher than the exports of Thailand, Malaysia and Indonesia combined. https://www.riazhaq.com/2014/06/civilian-democracy-vs-military.html

Pakistan needs to incentivize investment in manufacturing and export oriented industries to earn foreign exchange and grow the economy as Asian Tigers did and now Bangladesh is doing

Popular posts from this blog

Declining COVID19 Reproduction Rate in Pakistan Now Among the World's Lowest

Karachi's NED University Alum Raises $100 Million For Silicon Valley FinTech Startup

Antibodies Testing in Karachi Reveals COVID19 Exposure Runs in Double Digits