industrial policy, its spatial aspects and cluster development in ...

analysis supplemented by a broader
industry assessment that
contextualized value-addition achieved
in a particular chain. This
methodology helps identify those
factors which inhibit value addition
and result in relegation of firms to the
lower rungs of the global value chain.
The reasons behind the lack of value
addition and competitiveness is
identified with particular emphasis on
factor conditions, demand conditions,
domestic rivalry, related industries
and the role of the government. This
broader analysis provides insights that
became the basis for vertical policy
interventions that are both strategic
and emergent.
We are able to cover all major large
scale sectors, key SME export sectors
and light engineering sectors. This
coverage includes primary/ancillary
industry such as Steel, Chemical and
Fertilizer. We include knowledge based
sectors such as Auto, Electronics and
Pharmaceutical including Bio-
Chemical. And finally, we look at
eighteen small and medium scale
enterprise sectors some of which are
critical for export and some feed in
directly into the local markets. The
sectors in this category among others
include, Surgical Instruments, Sports
Goods, Fans, Cutlery, Agro-food,
Leather, Furniture, Marble and
Granite, Gems & Jewllery and Light
Engineering Sector.
We argue that the inclusion of
primary sectors is necessary as almost
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all the value added industry depends
for their inputs on these sectors. For
example, leather tanning requires the
use of 101 chemicals, out of which
around 98 are currently being
imported. This not only adds more to
the costs but also results in shortages.
Similarly, the pharmaceutical sector is
entirely dependent on imported
chemicals. We recommend that if
Pakistan is to move more towards
value addition then government will
have to invest in building the chemical
industry in the country. One such
recommendation is to set up a Naphta
cracking facility. Moreover, steel is an
input into almost all the value added
industries. It is surprising to see that
even with a large local demand for
steel the Steel Mill of Pakistan is
running in significant deficits. We
recommend to the government to
improve governance structure of the
Steel Mill and triple its capacity over
the next five years and make
investments to enable the Steel Mill to
manufacture high grade steel. We also
propose that government should use
the existing iron ore deposits of
Pakistan to its full benefit.
In this section we also analyze few of
the sun-rise sectors. The selection of
the sun-rise sectors is based on where
we believe gaps exist in the global
value chain and there is room for
Pakistan to augment its strategic
comparative advantage to competitive
advantage. We argue that such
opportunities mainly exist in