In response to slow growth, a well -busy and worn narrative regarding the need for an industrial policy is making the rounds again in official circles. It is proclaiming itself as the centerpiece of the remedy and the design of a growth strategy with a vision of the future. From reports that are finding their way to the media, it is not clear what an industrial policy would really represent. What would be your reach? Is it only manufacturing or your domain will be extended to the huge and varied services sector: IT, Digital delivered services, tourism, medical treatment, etc.? This article assumes that its compass is essentially confined to the industrial sector.
The case of an industrial policy comes from the belief that the dependence on markets alone cannot offer growth and achieve a fundamental transformation of the economy. Therefore, the Government must ‘choose winners’ or some ‘strategic industries’ supporting them and protecting them against well -established manufacturing companies worldwide and allowing them to increase the value chain, while providing employment opportunities nationwide.
In this writer’s opinion, the concept of an industrial policy belongs to an outdated era. The examples that are generally cited are those of Japan and South Korea, and much earlier, the United States and Europe, which adopted this approach and provided a selective refuge and achieved remarkable success.
However, this was achieved in a different era: one of closed or semi -raised economies and at a time when technologies developed at a lagged pace. But most importantly, preferential policies were only temporarily operational; The goal was to help them grow so that they eventually become internationally competitive.
However, in our case, although a handful of industries have greatly benefited from government interventions, including subsidies, tax fees and loan concessions and rates protection, it is remarkable that, despite the decades of support, none of the industries assisted by the State, for example, automobile, fertilizer, steel, sugar, sugar, energy, energy and energy, it has not become compete internationally.
These babies have not become adults; None have grown to obtain recognition as ‘winners’. And policies have simply rooted their dependence on continuous livelihood and brochures.
Pakistan does not need more attempts to attend, through subsidies and protection, industries that cannot be maintained in their own feet.
Therefore, in the highly competitive world today, in which global trade is anchored in supply chains, the protection of the national industry will not only make us non -competitive worldwide, but also can induce reciprocal retaliation. Industrial policy, therefore, is not a strategy for growth; It is a recipe for stagnation and inertia.
One fears the idea of our control control bureaucrats, with their limited knowledge and lack of versatility, with the task of choosing winners, specific industries, for direct state support. There is a greater probability that the sectors are selected involve the adoption of measures and actions of policies full of gifts. The result will be an industrial structure that is inefficient and uncompeitive worldwide, and one that does not exploit new openings with promising potential. In addition, given our own experience, there are many reasons to fear a strategy promoted by political convenience or captured by well -connected special interest groups.
In other words, the economy will end up encouraging losers, leading to the deviation of advantageous and productive use resources to keep those destined for extinction afloat. It is likely that rapid technological change will make supported industries redundant and archaic sooner than later. In fact, the uncertainty induced by technological advances will cause massive interruption, which makes it irrelevant and outdated even the better made interventions. These intermediates will be ineffective, and the competitive advantage, if any, that arises from policy interventions, will be neutralized. So that we do not forget it, they will be the markets that grow at an amazing speed and not to the governments that will determine the comparative advantage of a country.
In addition, the fiscal cost of supporting industries that can only survive in crutches will be high, at all at the expense of sustainable objectives that increase growth such as export improvement. The reinforcement of such industries will not only carry the consumer, but will also drain the limited financial resources of the government and divert the invertible funds of the areas that could have taken the economy to a higher sustainable growth route and improve its competitiveness.
Pakistan no longer needs attempts to attend, through subsidies and protection, industries that cannot be maintained in their own feet. What is required at this time is a system of government characterized by agility and flexibility so that it can adjust and adapt to circumstances that change rapidly.
Therefore, we should focus on creating a modern open competitive economy that can quickly acclimatize the global economic transformation environment.
This would imply the necessary support and stimulus in complementary areas and factors, such as education and skill development (which is in line with the emerging ecosystem), digital connectivity infrastructure, reliable and affordable energy, infrastructure and modern innovation. Only these factors may erect a competitive economy, and not tax concessions, subsidies and protection. It is true that it is easier to say it than to do it.
To conclude, for us, industrial policy is a concept that has suffered pain and, at best, can serve as a case study of the past. You should not underpin any future growth strategy.
The writer is a former governor of the State Bank of Pakistan.
Posted in Dawn, September 12, 2025
