Neglected Chemical sector

At this crucial juncture and in a depressing environment when the country is facing a lingering economic crisis that is in particular adversely impacting industrial activities, it is reassuring that the indigenous chemical industry, once neglected by successive governments, has continued to flourish, and offers immense potential for further growth.

Globally, the chemical industry is one of the largest and fast-growing sectors; a market of about $4 trillion with over 70,000 products. It is recognised as the ‘mother of industries’ since it is vitally important for overall industrial development and self-reliance, being a major provider of raw material to almost all sectors.

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Many of the chemicals are part of our daily life, whereas others are main constituents of practically all the manufacturing processes. Industrial chemicals, in solid, liquid and gas forms, are commonly used almost in all industries, including pharmaceuticals, rubber, soap and detergent, cosmetics and toiletries, food and beverages, cement, fertiliser, ceramics, glass, sugar, pulp and paper, iron and steel, oil and gas, leather and tanneries, coatings and inks, textiles and engineering industries, to name but a few.

Besides, the chemical industry provides key linkages in terms of product technology to several industries, such as automotive, engineering, consumer durables, food processing and petrochemicals. About 70 per cent of country’s overall industrial chemical output — basic, formulated and intermediates — is consumed by the larger manufacturing sector.

For this reason, growth of the chemical sector worldwide is directly proportional to the growth of overall manufacturing sector. Pakistan’s chemical industry, despite facing global competitive markets and lack of policy support from the government, has grown progressively over the years, and is considered one of the robust industries that has seen many ups and downs in the past, but has survived the odds. In fact, the industry has done well.

Like all other industrial segments, and much else, the industry had a setback in 2020 due to the Covid pandemic, but it soon recovered, contributing 3pc of the gross domestic product (GDP).

Currently, there are 28 listed companies engaged in production and marketing a large variety of chemicals, and employing thousands of workers. In addition, there are many units operating in the non-formal sector.

Industrial chemicals are produced by converting raw materials, such as fossil fuels, minerals and metals, and water, with most of the required input being locally available. Generally, the industry makes huge profits based on high demand of products and low competition, and the profits are increasing as its earnings have grown 24pc and revenues 15pc per year over the last three years.

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Within this flourishing market, however, multinational players have a field day, with the domestic entities struggling with low-level production, being unable to maintain consistency in production and quality, and marketing products that mostly have a very low value-addition component. They have not focussed on diversification of products, particularly of industrial chemicals. However, they have remained narrow-based not because they have a narrow vision, but because of various constraints that hinder their way.

The exports in 2020-21 were nominal at $1.15 billion, mostly to Afghanistan, Bangladesh, the United Arab Emirates (UAE), Vietnam, Turkiye, which constituted a mere 4.54pc of the total national exports. Exports included plastic materials, pharmaceutical products and other industrial chemicals.

There is a tremendous potential for the development of chemical industry in view of the great demand of industrial chemicals. During 2020-21 itself, Pakistan imported industrial chemicals worth $8.6 billion, which included plastic and medicinal products, insecticides and other items.

It is projected that the size of Pakistan’s chemical market could reach $20 billion in view of the domestic large-scale manufacturing (LSM) sector’s average growth. Besides, there are promising prospects for increasing exports as well.

The situation justifies additional investment in the sector in a big way for it will help us in import substitution and export expansion. It is thus imperative for the government to support the chemical industry through a proper policy framework and action plan to create an environment conducive to investment and capacity-building.

Indeed, the long-awaited integrated industrial policy covering a proposed action plan for the entire chemical industry should be finalised, announced and implemented by the government without any further delay.

HUSSAIN AHMAD SIDDIQUI

ISLAMABAD

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