Charting Triple-Track Development Journey for Pakistan

 

In my previous two articles on technology transfer, the focus was predominantly on understanding the nature of the process and suggesting some preliminary measures to facilitate it.  In the current text, I suggest an embryonic development model, which I will refer to as the Triple Track Development Model.

By Triple-Track development model; I mean the utilization of three interrelated pathways to achieve development;

  •  The traditional pathway for industrial development which progresses from Light Industry to Heavy Industry to Capital-Intensive industries;
  • Knowledge/Digital based development using ICT & digital technology to leverage growth and innovation; and
  • The renewable technology development pathway for growth and prestige.

Track-I: The Traditional Industrial Development Path

Let’s begin with the carbon-fueled traditional pathway for industrial development. Given the prevailing conditions, this approach to development poses several challenges, especially for Pakistan.

Firstly, there is significant competition among countries seeking industrial development within global value chains. However, we observe a gradual decline in the effectiveness of traditional strategies, such as offering incentives through economic zones, in attracting investors[1].

Secondly, the competitiveness of our traditional industries, especially energy intensive ones, is being impacted by high energy prices. This particularly affects sectors such as aluminum, steel, and glass production, as well as smelting and cement manufacturing.

Thirdly, our institutional framework for industrial development faces challenges in fostering cohesive collaboration among stakeholders due to differing priorities and a lack of alignment.

Fourthly, the overall macroeconomic and policy environment, may need refinement to better cater for investors’ confidence to grow and prosper. Political stability and government support are among the major factors for attracting FDI. 

Lastly, there are concerns regarding the “perception of security” within the country, which may influence investor confidence in our Special Economic Zones (SEZs) and other industrial parks.

All the above challenges overshadow to varying degree the comparative advantages of Pakistan, which are cheap labor, abundant natural resources and its geographic location. However, it’s essential to highlight that manufacturing based industrial development is a must for a country like Pakistan to provide employment to much of the Gen Z population, which is currently estimated at around 67 million. Furthermore, manufacturing is the source of innovation in many ways and cannot be ignored in our development journey (it will be discussed in some later post)

Track-II: The Digital Innovation/Industry 4.0 Path

The second track to expedite development involves the exploitation of some of Industry 4.0 frontier technologies, which are human-centric and knowledge-intensive. These include AI, (Industrial) Internet of Things, Big Data, Blockchain, and to a certain degree, 3D printing etc. Market for these technologies is promising and expected to reach significant value by 2030[2].  

Pakistan’s tech endowments are sufficient to support the digital innovation pathway; although IT and Software Development dominates this sector; however, skilled human resources in other technologies can be trained with relative ease to kick-start development through this track. However, achieving this vision necessitates meticulous upkeep and governance of the digital infrastructure, backed by urgent policy initiatives.

With little CAPEX, Deployment of IoT technologies in our manufacturing and service sectors can enhance the operational efficiency by 30 percent and even more, Dr. Naveed Shirwani highlighted virtually in a session of CPEC of the Turnaround Conference held on June 28th, 2022.

Track-III: The Exploratory Path with Renewables Tech Development at the Core

The third track is the development of frontier technologies in the energy sector. Energy is the lifeblood of industry and the foundation of national security. However, fossil based energy development beyond baseload in a country heavily reliant on imports further undermines industry competitiveness.

Even for the traditional pathway of development, cheaper and cleaner sources of energy such as hydel, or other any combination of renewables such as solar, wind, biofuel, biogas, and green hydrogen, are critically important. Growing pressure to adopt cleaner technologies with social upgrading of their employees add impetus to enterprises to consider these options.

Solar and wind energy technologies are obvious contenders for development, but challenges exist. Both solar and wind technologies have reached to the maturity stages with China being the dominant global player in the Solar PV technologies, while Denmark, Germany and China currently dominates the global market in the wind sector. Latecomers have little windows of opportunity to dominate there; so pursing their development in the face of fierce competition from the leaders in the market may not be a judicious undertaking.

Green hydrogen technology, however, offers ample opportunities for Pakistan. With abundant solar and wind energy resources as input, it can be produced domestically with imported technology first, indigenized through technological learning process (technology transfer process). This would require investments in the R&D of electrolysers and infrastructure development in the long run to hone the technology and exploit it to full potential locally as well as internationally. For solar technology, the government must negotiate with the technology provider to setup plants in the country with public procurement guarantee as the most viable incentive for the investor.  

There is another reason why green hydrogen should be the Government’s energy policy priority. Green hydrogen with calorific value three times that of gasoline and four and even more times that of high quality coal can be used to fuel various sectors including agriculture by developing fertilizers and other chemicals. Some developing countries like Chili is making some visible progress on that front.

According to Precedenceresearch.com, “the global green hydrogen market size was estimated at USD 6.26 billion in 2023 and is expected to hit over USD 134.38 billion by 2032, poised to grow at a CAGR of 40.6% from 2023 to 2032”.

In summary, the incipient green hydrogen technology, if chosen to, may provide some space to Pakistan to assume some pioneering role in the renewable energy technologies and offer Pakistan with opportunities to optimize its energy mix to make the traditional pathway of industrial development competitive and “green” in the long run. Although the cost of 1 kilogram of green hydrogen is relatively high, but improvement in the technology and the falling prices of renewables, solar and wind at a rate of 13 % and 9 % year-on-year basis respectively, will make it more affordable in the near future. It is crucial to recognize the importance of establishing proficiency in cutting-edge renewable technologies now, particularly with hydrogen emerging as a viable contender, to showcase Pakistan's capabilities in the energy sector.

Conclusion

To conclude my discussion on the subject, let me highlight that the future belongs to those who make judicious choices. In the arena of industrial development, the levers for fostering growth in the conventional sphere may not have changed much, but the context does. Industry & businesses operate now within a completely different techno-economic paradigm, it used to be. Other emerging development spaces should also be explored, and efforts must be smartly coordinated in time and space to create synergies among the three tracks of development, with a primary emphasis on digital and knowledge sectors to generate resources for the flourishing of other sectors.

Development, especially industrial development, in the contemporary era is too complex to be left unattended; it must be guided by a well-coordinated and committed policy that is linked to other related policies and leveraged with resources. Otherwise, a policy without resources is merely a wish.

 


[1] Frick and Rodríguez-Pose, “What Draws Investment to Special Economic Zones?”

[2] “Technology and Innovation Report 2023.”

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