The news from large-scale manufacturing, especially textiles, is not good
Large-scale manufacturing is crucial to Pakistan’s efforts to becoming a self-reliant economy. Not only is it supposed to generate, especially through textile made-ups, the foreign exchange made to pay for essential imports, but it is also supposed to provide the bulk of the jobs the government needs to have created, so as to enhance its future electoral appeal. There have been signs that the government’s policies have led to a recovery in large-scale manufacturing, which might signal the pick-up in the economy that would justify current austerity measures.
However, the signals have been contradictory. There has been a pick-up in auto financing, which indicates increased demand for vehicles, which itself is a good indication that people have more disposable income to spend, including on consumer durables. It may well mean that there is a pent-up demand which is being released because consumers now feel that they can afford such big-ticket items as vehicles. Another positive sign comes from the upswing in software exports, which in November were 14 percent up on the previous year. The government has targeted $5 billion in exports in this fiscal year, which the Uraan Pakistan programme for seeing software exports of $10 billion by 2029.However, while the automotive industry does not have much export weight at the moment, it is increasingly being said in industry circles that it is only if there are vehicle exports that the vendor industry will truly develop. The main export, textile made-ups, is taking something of a beating, for despite the recent tariff advantage by the USA to Pakistan against regional rivals like India and Bangladesh, textile exports are declining. One effect has been the swelling of the trade deficit to $37.78 billion for the first five months of the current fiscal year. This is matched by the rise in foreign exchange reserves to$21.089 billion on December 12, after the IMF disbursement of $1.2 billion under the EFF and RSF.
Instead of viewing LSM as a single sector, the government must learn to differentiate. It should realise that textiles may not remain the lead industrial sector for too long, and that software and vehicles might be more fruitful. That does not mean abandoning textiles altogether, but other sectors deserve attention. For example, the question of how the automotive sector is to export is crucial, but it must be tackled along with the switch to electric vehicles.
