Making industrial policy work | Political economics

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Nearly years behind schedule, the industrial landscape of Punjab is showing encouraging signs of imminent recovery. Reviving its manufacturing sector could provide a much-needed boost to its economy.

However, revitalizing the province’s manufacturing industry will not be easy. Punjab needs to fill critical gaps in its supply chain management, infrastructure and availability of skilled labor. In addition, the lack of streamlined processes, low levels of economic complexity and innovation hamper the productivity of this sector in Punjab and Pakistan.

The aim here is to analyze the roadmap to revive Punjab’s manufacturing sector as well as explore different ways policy makers can go about it.

With a share of agriculture in GDP of 23.13% and a share of the industrial sector of 17.72%, Punjab’s dependence on the former is far greater than its contribution to the latter. The manufacturing sector has struggled to gain traction for decades. Lack of a strong supply chain network and absence of a skilled workforce are some of the major challenges facing the sector. Lack of reliable infrastructure, especially power and transport, has also contributed to the decline of the sector in Punjab. With daily power cuts and bad roads, it is almost impossible to set up a factory in the province.

Punjab has a long and distinguished history of industrialization. The province’s transition to industrialization began in the late 1940s with the establishment of several textile mills. Highly skilled labor and abundant supply of water for power generation were some of the major factors that contributed to the boom of Punjab’s textile industry. This sector quickly became a hub for other types of industries, such as cotton, wool and silk products. The presence of a number of engineering-based industries, as well as a vibrant machine-based sector, has also helped it to become one of Pakistan’s major industrial hubs. However, the rise of Punjab’s industrial sector came to a halt in the 1990s when the country experienced a severe economic crisis. In the absence of political stability and sustained economic reforms, the economy has suffered greatly. Punjab was the hardest hit, with the number of operational textile factories dropping from 170 in the late 1980s to just 50 in the 1990s.

The government should encourage cooperation between businesses and universities by encouraging and implementing grants and scholarships that reward innovation. Such tightness between academia and industry can only make companies more innovative. These links are necessary to achieve the goals set by the SDGs and improve productivity.

One of the biggest obstacles to reviving the manufacturing sector is the lack of a strong supply chain network. The current supply chain model is not only dysfunctional, but also highly unreliable. In order to boost its manufacturing sector, Punjab needs to invest in its infrastructure and set up a supply chain authority. The province should focus on building an effective vocational training system. In addition, its manufacturing sector needs a boost in the availability of raw materials.

A recent study titled Documenting Firm-Level Innovation in the Punjab Textile Sector provides valuable information on how the industrial sector of Punjab can be revamped. The study revealed that there is a lack of innovation and value addition in the textile sector, which is one of the key industries in Punjab. In order to become more competitive in the global economy, it is essential for Punjab to focus on increasing value addition in its industrial sector. It has been found that exporting companies, trying to increase their market share, spend positive sums on research and development. The government should encourage cooperation between businesses and universities by encouraging and implementing grants and scholarships that reward innovation. Such tightness between academia and industry can only make companies more innovative. These links are necessary to achieve the goals set by the SDGs and increase productivity. A key takeaway from the study’s findings is that education, technology and industrial policy should be treated as complements. Estimates show that the lack of skilled labor significantly reduces the likelihood of innovation. Not only is creating a skilled workforce important; creating meaningful jobs for workers is equally important.


The writer is a independent contributor


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