• The petrochemical sector can help us replace imports, promote export-led growth and join the ranks of industrialized countries
Pakistan is at a critical juncture where industry, government and other key stakeholders need to make urgent calls related to the economy. There is an urgent need to solve the unsustainable economic equation by prioritizing smart investments that will reduce the country’s imports and boost exports.
Latest data released by the Pakistan Bureau of Statistics (PBS) reveals that the country’s trade deficit remained significantly high at $32 billion in the first eight months of the current financial year.
The government had envisioned the annual trade deficit target at $28.4 billion, but that mark was already breached in the seventh month of the current fiscal year. As a result, Pakistan’s economic situation is precarious as the higher deficit will lead to more foreign borrowing.
Currently, the country’s imports are twice its exports, which means more dollars are leaving the country than they are coming in, adding to our trade deficit and, in the long term, weakening the Pakistani rupee by against the dollar. Earlier this month, the dollar hit an all-time high of around Rs 180.
To curb imports and achieve long-term growth, Pakistan must urgently embark on a journey of industrialization. Globally, the petrochemical industry is recognized as the basis for industrial development. At present, Pakistan is one of the few countries that is significantly dependent on petrochemical imports.
Domestic production of petrochemicals is essential as it provides raw materials for more than 20 industries, including food packaging, cars, appliances, construction, paints, pharmaceuticals, textiles, furniture, equipment medicines, soaps and detergents. Thus, petrochemicals facilitate our daily lives by providing lightweight, high-strength, non-porous and durable solutions at economical costs.
A ripe opportunity for Pakistan
Pakistan’s petrochemical sector is underdeveloped, as evidenced by the lack of a petrochemical cracker (equipment that converts simple fossil fuel into different products), heavy reliance on imports of petrochemicals, it is i.e. 5% of Pakistan’s total import bill, and the low per capita plastic consumption of 8 kg. against the world average of 55 kg. Thus, Pakistan has a clear opportunity and economic logic to develop its petrochemical sector.
The most viable way to revive the development of this sector is to invest in intermediate petrochemicals. Currently, there is adequate local demand for six petrochemical intermediates: polypropylene (PP), purified terephthalic acid (PTA), polyethylene terephthalate (PET), polyvinyl chloride (PVC), methanol and alkylbenzene. linear (LAB). The availability of tailored technology and adequate local demand will pave the way for the establishment of world-scale midstream petrochemical plants in Pakistan.
A vibrant midstream petrochemical sector will ensure the development of a downstream industry by providing raw materials and technical support. In the long term, the midstream petrochemical sector will generate the demand needed to justify the establishment of a large-scale petrochemical cracker in Pakistan.
The path to follow
If we take a step now, these projects will become operational by 2026-27 and will generate significant economic dividends for Pakistan through net import substitution and job creation.
To turn this ambition into reality, the country needs a holistic and long-term petrochemical policy. Since petrochemical projects are capital-intensive and have long gestation periods, they will require a 15-year roadmap to attract investment. Analysis by industry experts indicates that the development of a robust petrochemical sector can change the fortunes of the country, but this cannot be done without a comprehensive policy.
At this point, Pakistan is already behind. We have to catch. If we miss the opportunity to invest and develop the country’s petrochemical sector, it will be our loss. Without a petrochemical policy, the dream of mega-industrialization will falter for another decade or two, and we will continue to be a trade-driven, import-dependent country.
It is imperative that we immediately position ourselves towards industrialization and embark on a path of sustainable economic growth. But before we start, we need to get our house in order. We need to understand the benefits of a petrochemical industry in Pakistan, we need to develop policy and we need to work together – government, investors and civil society – to ensure that the petrochemical industry in Pakistan is a resounding success.
(The author is an academician and freelance journalist. She can be reached at [email protected] The opinions expressed in this article are not necessarily those of the newspaper)
Copyright Business Recorder, 2022