ISLAMABAD, Nov 22: A long-term industrial policy, with clear goals, targets and sector-specific incentives, is being planned to develop the much-needed engineering goods industry aimed at widening the weak export base of the country.

Informed sources told Dawn on Thursday that all economic ministries were expected to join hands shortly for working out a long-term industrial policy by offering an attractive incentive structure for Pakistani firms to have joint ventures with large multinational corporations to invest in Pakistan and make the country a member of the global supply chain.

The objective is also to help renegotiate existing agreements with foreign partners to permit export of cars, tractors, etc., from Pakistan.

In this regard, the taxation system was further expected to be reformed to ensure effective implementation of research and development (R&D) benefits and timely tax refunds.

The government has been proposed to develop a clear vision to move industry into high technology orbit through product diversification, value addition in disposable instruments category to increase penetration in the European market.

The diversification towards the development of allied products, like plastic disposable, hospital textiles, hospital furniture, has also been proposed.

Similarly, diversification towards non-steel medical devices and electro-medical appliances, exploring non-traditional market which is Middle East, Japan, Africa, South American and developing Pakistan as the supplier of surgical instruments kits has also been proposed to the government by the Policy Planning Cell of the ministry of labour, manpower and overseas Pakistanis.

It was stated that the engineering goods industries demonstrate strong backward and forward linkages essential for rapid economic growth and employment generation.

It currently employees around 600,000 workers and contributes significantly to the GDP.

Pakistan roughly saved $3.75 billion annually through import substitution. The performance of the engineering sector is, however, less than satisfactory. Its share in meeting local demand is merely 25 per cent and the growing domestic demand for imports have almost doubled over the last eight years.

Pakistan’s share in the world’s export of engineering goods of $6 trillion is only $0.27 billion.

In this regard, it was stated that low technology base and low value-added production largely confined to the agro-based industry and are the characteristics of Pakistan’s engineering industry. The causes of reported slow growth are : ad hoc approach in policy formation and preferences for import of turn-key plants and machinery, priority to less value-addition areas for investment and tariff support and lack of adequate incentives to attract investment in high value-added sector, unfavourable cost structure due to lack of economies of scale in production, high inventory carrying cost, low labour productivity, high utilities cost and high cost of local inputs, particularly steel products, poor quality culture, lack of R&D, design and support facilities, resulting in the inadequate vending/sub-contracting facilities, and lack of entrepreneurs and management skills. In this behalf, the government was urged to remove discrepancies and anomalies of preferential treatment for duty- free import of products and greater and effective use of existing R&D institutions in close collaboration with the concerned industry established by the ministry of science and technology, such as Pakistan Council for Scientific and Industrial Research (PCSIR), having laboratories in provincial capitals, technology incubators involving many industries in the National University of Science and Technology (NUST) and Pakistan Council for Renewable Energy Technology (PCRET).

The most important step for promotion of engineering sector is to allocate more resources to basic, technical and engineering education.

Also, autonomous boards were proposed for each engineering sector with close collaboration with engineering universities and industry to cater for the industrial needs.

These boards should comprise members from the engineering industry, academics and the government.

The main objective of the board would be to build bridges between the academic institutions and industry.