CHEMICAL INDUSTRIES IN PAKISTAN

The global chemical industry forms the fabric of the modern world. It converts basic raw materials into
more than 70,000 different products, not only for industry, but also for all the consumer goods that
people rely on in their daily life. The modern chemical industry is divided into four broad categories,
comprising basic chemicals, life sciences, specialty chemicals and consumer products. Its outstanding
success is largely due to unceasing scientific and technological breakthroughs and advances, which have
led to the development of new products and processes.

Chemical industry development in Pakistan has been classified into

(i) the primary sector chemical industry

(ii) the secondary sector chemical industry.

Primary sector industries are large-scale, capital intensive industries comprising refineries,
petrochemicals, natural gas, metallurgical and mineral based projects. They also provide feedstocks for
the secondary chemical industry.

Secondary industries are based on feedstocks either derived from primary sector industries, or other
alternative sources of raw materials. These are less capital intensive and are based on high, medium or
less sophisticated technologies.

Primary sector industries which provide feedstocks for the development of secondary sector chemical
industries, as well as other alternative sources of feedstocks consist of:

(i) Petroleum and petrochemical refineries. These provide petrochemical intermediate chemicals,
which form the building blocks to produce a very large number of secondary chemicals, such as
polymers, fibers, pharmaceuticals, drugs, dyes and colors, insecticides, pesticides, resins, paints,
pigments, specialty chemicals, and a very large number of consumer and construction materials
and products.
(ii) Natural gas based chemicals, which consist of methanol and ammonia. These can also be used
to produce many secondary chemicals.
(iii) Metallurgical metals and non-metals based secondary chemicals and products
(iv) Alternative renewable feedstocks for the production of secondary chemicals consist of bio-
mass, agricultural wastes, oils and fats, molasses and power alcohol.
(v) Unconventional natural gas.
(vi) Mineral based secondary chemical industries derived from coal, limestone, gypsum, rocksalt,
silica sand and sulphur.
(vii) Vegetable and herbal plants used in the production of secondary chemicals, such as dyes,
medicines, drugs, cosmetics and associated products.

The development of secondary chemical industries is divided between projects based on sophisticated
technologies, and those based on medium and less sophisticated technologies.

Development of the chemical industry in Pakistan is lagging those of other emerging markets. The
various factors which have hampered the development of this industry in Pakistan are:

(i) An underdeveloped industrial infrastructure.

(ii) Reliance on foreign engineering and construction companies for the commercialization of
locally developed or imported technologies.
(iii) Imports of second-hand highly energy intensive plants based on antiquated technologies.
(iv) Reliance on the development of resource based, low technology, labour intensive products
for export.

The development of the chemical industry in Pakistan started in the 1950s and is based on five year
plans, with the first plan covering the 1955-60 period. Economic growth was based on a policy of
import substitution, resulting in varying rates of growth of between 3.1-6.8% over 1950-70.
However, this masks a highly variable performance: the rate of growth slowed in the early 1970s to
an annual average of 4.4%, but the economy was revitalized in the late 1970s and 1980s, before
weakening again. However, in view of the inconsistencies in the development of trade policies
geared towards export-led growth, Pakistan has failed to boost exports of its manufactured goods.

Chemicals, drugs, medicines and dyes, as well as capital plant, equipment and machinery, together
account for about 40% of total imports with an estimated value of US$16.3 billion for the year
2007/08. As a result, the trade balance has been continually increasing and stood at US$20.9 billion
in 2007/08.

Present trends in Pakistan’s exports of lower technology goods indicate that it is facing increasing
competition from India, China and Bangladesh. In addition, global demand for these products is
declining, and the need for higher technology products is rapidly growing. This situation calls for a
concerted effort towards the development of a chemical industry based on medium and highly
sophisticated technologies.

However, Pakistan has failed to assimilate these imported technologies, or use them either for the
replication of these plants or in the development of associated chemical projects.

Pakistan’s industrial infrastructure is limited and it relies primarily on foreign design and engineering
companies for the commercialization of local and imported technologies. Therefore, there is
immediate need for enhancing and modernizing its national innovation system (NIS). This is the
framework by which a country brings about technological change, and consists of research and
development (R&D) institutions, the infrastructure for commercialization of technologies, the
structure of educational and technical institutions, regulatory agencies, information networks,
financial institutions and marketing.

An Industrial Master Plan must be prepared for the implementation of various elements of the NIS,
which should identify Pakistan’s capabilities and limitations in various priority sub-sectors of the
chemical industry. It should develop policy measures and provide fiscal incentives to promote
investment in various sectors of chemical industry. The development of a NIS on international
standards will provide tens of thousands of jobs to Pakistan’s highly qualified manpower.