Global Policy Forum

By Jawaid Bokhari

World Bank President James Wolfensohn has said that it was not his bank's policy to propose phasing out industries in countries receiving WB funds for structural reforms. He was answering questions by a group of Pakistani participants in the annual meeting of the IMF/WB held at Prague in September. "It was not our policy," remarked the WB chief when informed of the letter reported to have been written by a bank official based in Islamabad to Minister for Commerce and Industries, Abdul Razzak Dawood, to formulate a new industrial policy to phase out seven industries considered "internationally uncompetitive".

Sources said that the ministry of industry had also been informed of the observation made by Wolfensohn. A participant who had informal conversation along with a group of Pakistani delegates with the WB president said Wolfensohn's attention was drawn to violent demonstrations outside the conference hall. The questioner had said that such protests could not be ruled out in Pakistan if some major industries, as advised by WB, were gradually closed down, creating massive unemployment.

Abid Hasan, a WB representative, is reported to have suggested that the government should formulate a new industrial policy which should curtail investment in industries contributing "negative value-added at world prices." In this context, he referred to such industries as steel, sugar, fertilizer and chemicals. A senior official of the ministry of industries told Dawn that the World Bank had made no formal recommendation on the subject even though a casual reference was made to some industries in the letter of the WB official. The reported advice to phase out seven industries has however not been publicly denied or owned by the government though it caused some concern in the industrial sector.

On the other hand, the government has been proceeding with the formulation of its industrial policy, ignoring the reported advice. A new fertilizer policy is anticipated by officials by the end of this month to facilitate privatization of two fertilizer factories in the public sector and encourage investment in new projects. Under review is the gas price, duty on import of fertilizer plants and machinery and financial and economic viability of projects.

Similarly, the industrialists are concerned over the reported official move, not denied so far, to do away with the deletion programme of industries including electrical, electronic and automobile sectors. The reported move, say vendors, follows WB advice on seven industries. The Pakistan Association of Automotive Parts and Accessories Manufactures has urged the government to clarify its position publicly and pointed out that present ventures were mainly joint ventures with foreign investment which may sooner or later dry up if uncertainties mar the future prospects.

Extending support to the domestic industry, the Japanese external trade organization, JETRO has observed that inconsistent and ineffective execution of deletion policy has led to under-utilization of installed capacity, low vending base, heavy dependence on imports and resulted in slow growth of the local auto industry. A Japanese source said trade and investment is declining specially after the nuclear blast in May 1998. With business opportunities shrinking, two to three Japanese companies have closed down their offices in Pakistan, he added.

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