South Asia’s Industrial Development Joint Venture Essential

By Khilendra Basnyat

IN development literature, the industrial sector has been emphasised as the engine of growth. However, so far, industrialisation in most South Asian countries has only a marginal effect on the disruption of surplus population from rural areas. It is because agriculture occupies a pivotal position in South Asian economies. In terms of Gross Domestic Product (GDP), it accounts for about three-fifths in Bangladesh and Nepal, two-fifths in India and one-third in Pakistan and Sri Lanka.

Employment

Agriculture is also the major source of employment in this region. About 90 per cent of the labour force in Bhutan and Nepal are employed in this sector. In fact, South Asia’s rural poor are persistently utilising the available land for cultivation. They depend on wasterland for their food, firewood and fodder needs. The existing practices of land use patterns are notable to even fulfil the rural poor’s basic needs. Therefore, it is essential to pay attention to industrial development.

Over the past one and half decades, South Asia has witnessed a moderate rise in the share of the industrial sector. The contribution of this sector to the GDP rose from 25 per cent in 1980 and 30.2 per cent in 1997.

The share of industry in GDP was the highest in Sri Lanka (32.3 per cent and the lowest (17 per cent) in Maldives in 1997. Its share in Bangladesh, Bhutan, India, Nepal and Pakistan were 28, 19.2 , 31.9, 19 and 26.4 per cent respectively in 1997.

In the past few decades, Bhutan, Maldives and Nepal have recorded a more impressive increase in the share of industry than other South Asian countries. In most South Asian countries, the main industry is textiles and clothing. The second largest industry is chemical which has doubled in Bangladesh in 1983 over 1970, trebled in Pakistan over the same period, and remained stagnant in Nepal and Sri Lanka. In India, it occupies the third position.

In the industrial sector, the homogeneity among the countries observed in the case of textiles and clothing disappears for the other manufacturing value-added items. In India, machinery transport equipment occupies the second place in industry. In Sri Lanka, there had been a decline in the sector in the past few years. However, Bangladesh, Bhutan, Maldives and Nepal have not made progress in this industry.

Most South Asian countries import huge quantity of capital goods from abroad. Such goods include metals, machinery (including electric machinery and transport equipment), petroleum oil and lubricants, fertilisers, minerals, chemical elements and compounds, foodstuff and edible oil, etc.
It is only India that exports some finished goods such as textile products, readymade garments, engineering goods such as textile products, vehicles, etc.

Pakistan also exports large amount of textile goods to other countries. However, both of them face the problem of high tariff barriers and protect against their exports. They also encounter the problem of qualitative efficiency of their goods in the competitive market. Since they do not have sufficient industrial capacity or technical know-how for full exploitation of their resources, they usually face under pricing of their agricultural products in the world market. Also, they do not have reserving facilities and bargaining power vis-à-vis developed countries.

By nature of their economies, most South Asian countries are dependent on foreign capitals for their industrial growth and development needs. However, the problems are increasing in the present crisis of the world economic order, which is totally in favour of developed countries. In recent years, structural transformation is in vogue in most South Asian countries. One aspect of such transformation of these countries’ economies in the diversification and broadening of they’re industrial structures from one predominated by simpler industries to the more advanced and more knowledge-intensive industries.

Over the past decades, the industrial structure of South Asian countries has moved toward diversification in a sustained manner. Although the degree of specialisation has declined over 1985-95 for most South Asian countries, the extent of the change varies across the border. Sri Lanka followed by Nepal has recorded most improvement towards diversification of the industrial structure. In the past few years, India, has recorded 23.3 per cent decline in the levels of specialisation while Pakistan 17.5 per cent. In the case of Bangladesh, the progress towards diversification has been rather slow with only a 2 per cent increase over a decade.

In reality, South Asia’s economy has witnessed structural transformation in its production sector during the last two decades. However, the extent of such transformation has varied across the regional countries.

The growth rates of industry in this region achieved during the 1990s have been higher than those recorded in the 1980s. This shows that the pace of structural transformation has gained speed. However, manufacturing industry in most South Asian countries is still dominated by textiles and apparel and food processing. No doubt, most South Asian countries have pursued development strategies emphasising industrial development with a great dependence on import substitution. However, in the 1980s and the early 1990s, attempts were made by these countries to move away from the orthodox substitute industrialisation strategies and to liberalise internal policies in order to integrate domestic economies with the global economy.

The shift in the policy perceptions of South Asian countries is conducted by opening up their economies, liberalising the industrial sector from control and facilitating the inflow of foreign capital and technology for sectional restructuring. Consequently, there have been positive impacts on industrial productions in these countries.

Since the past few decades, India has made considerable progress in small industrial sectors such as textiles, food processing industries, pulp and paper, light engineering goods, chemicals and pharmaceuticals, cement, iron and steel products and commercial vehicles, and non-manufacturing sectors such as hotels and restaurants, construction, etc.

Like India, Pakistan has made headway in constructing viable infrastructure for science and technology. The Pakistan Council of Scientific and Industrial Research is a major organisation, which conducts research and development works related to industry. Among others, it undertakes research and development in oils and fats, food and fermentation technology, solar energy, ore processing and metallurgy, glass and ceramics, paints and plastics, pharmaceuticals, fine chemicals, polymers, leather etc. Such works have been fruitful to expedite industrial development in Pakistan.
Today, several Indian public sector undertaking and private industrial houses are in a position to undertake turnkey projects in a large number of manufacturing industries, electrification projects, electronics and telecommunication as well as civil, mechanical and electrical projects.
In fact, India has attained a high level of technological development and managerial capacity, which can be shared by other South Asian countries profitably. It can collaborate in establishing joint ventures in neighbouring countries, which processes adequate raw materials for industrial development.

Joint Ventures

In fact, joint ventures can be started in Bhutal and Nepal for cement, in Bangladesh for paper, fertiliser and natural gas and in Sri Lanka for rubber goods. Such ventrues will not only improve the balance of payment situation of the small countries of the South Asian region but will also improve both trade and industrialisation process in these countries.

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