Chemical Industry and its importance:

Chemical industry in Pakistan is widespread, in organized & unorganized sector. It has

approximation of investment in chemical sectors between Rs.550-600 billion. The chemical
related imports constitute about 17% of the total import bill.5 (Pakistan chemical industry:
challenges and prospects- analysis )
The chemical materials are converted into more than 70,000 various products, for industry
as well as the goods of consumers that people depend on in their daily life.6
Chemicals are important as they play the role of a building block to produce products in
order to fulfill the basic needs like, shelter, food and health.8 They also are central to the
world of technology, telecommunications and of course biotechnology. These are used to
make a large variety of consumer goods and have inputs in agriculture, manufacturing,
construction and services industries.
Chemicals in particular, are a keystone of world manufacturing, as they are an integral
component of all the manufacturing sub-sectors, including pharmaceuticals, automobiles,
textiles, furniture, electronics, construction and appliances.9
The market of chemicals is divided into 4 (economically): Basic chemicals, Life sciences,
specialty chemicals and consumer products
. Pakistan has made considerable progress in basic inorganic chemicals like Soda Ash,
Caustic Soda, Sulphuric Acid and Chlorine and has acquired sufficient production capacity of
these chemicals to cater for the needs of the local industry, while surplus is being exported.
12

Reasons for bad situation currently as well as future outlook:

 Unfortunately, the imports are much higher than the exports. Pakistan needs to
enhance its chemical exports which would really help in the growth of Pakistan’s
economy. If not, then it must not rely on the imports and must adopt the policy of
self reliance on its own resources.
 The chemical industry of Pakistan is lagging behind due to some challenges. The
main challenge is that it has to rely on its imports and foreign materials. It does not
benefit the economy and results in production of expensive products.
 Secondly lack of industrial infrastructure and technology in Pakistan results in low
quality products which do not mark the standard.
 The discriminatory approach of international community does not integrate the
Pakistan market into the international economy and Pakistani products are not given
access to the international market.
 Moreover, the lack of resources and weak trade policies of the ministries also result
in the weakening of chemical industry.
  In order to enhance the chemical industry Pakistan must adopt the policy of “self-
reliance”. Instead of relying on foreign designs and engineering it must improve its
own production and ensure high quality of chemical products.

BR Oct 2019

 Unfortunately, due to absence of even a single cracker complex, down-stream

industry of Pakistan is dependent on imports, he lamented.
 They underlined the need of government-industry and academia collaboration for
long-term planning to overcome the barriers resisting development of chemical
industry in Pakistan.
 Problems in implementing initiatives in development of the chemical industry.

BR Dec 2019 BR

While the chemical sector of Pakistan contributes around 3 percent in export and its share
in imports is 16 percent, he said adding that PCMA wants to make this sector self-reliant by
developing a strategic roadmap, which can create thousands of new jobs. (by starting
Chempetrochem magazine)

BR Apr 2019

member companies are playing key role in providing important chemicals to export oriented
sectors.

 chemical industry has not been given due importance while announcing reliefs, he
said and lamented that unlike champion countries in chemical manufacturing like
China, USA, Germany, South Korea and India hardly any support was provided by the
government of Pakistan in laying the infrastructure which is a pre-condition to
attract private investment/FDI.
 He complained that cash-flow of the chemical manufacturing companies had been
hampered adversely due to non-payment of their tax refunds. He said that a large
sum of tax refund of the member companies was due from the government end.
 He pointed out that after passing through a cumbersome procedure of establishing a
tax refund, the payment is finally stuck in FBR Islamabad waiting go ahead from the
government to release funds.
 Our naphtha (feedstock) has been selling on throw-away prices and not a single
Naphtha Cracker Complex could be established in Pakistan as of today, he regretted.
On the contrary, he said that India had established 9 crackers, Iran despite
challenging sanctions had put in place 8, Singapore without even having any
feedstock had established 8 state-of-the art petrochemical complexes

A few months ago, the government released Rs 8 billion for tax refund which were all spent
on settling refunds of export oriented sectors and other potentially deserving industries
including chemical industry were ignored

BR Jan 2020
  High electricity cost has made its affordability a problem for sectors including chem
 It suggests that investors are shying away from investing in the country because of
the high rate of taxes on the one hand and unaffordable electricity tariff on the
other, they added.

BR Sep 2019

 The Pakistan Chemical Manufacturers Association (PCMA) has said that the local
chemical industry is witnessing severe crisis after withdrawal of the facility to import
tax free raw material for producing intermediary goods for export oriented
industries like textile and leather.
He added that most of the chemical units in Pakistan were erected to meet needs of the
export oriented units (EOUs) which have now been allowed under SRO 327 to import all raw
materials free of sales tax. Surprisingly, he lamented, the government has also withdrawn
exemption of sales tax in case the EOUs buy the similar raw materials from domestic
chemical industry. "In this scenario, the local chemical industry is unable to understand the
approach of the incumbent Pakistan Tehreek-e-Insaf (PTI) government towards encouraging
foreign chemical suppliers and discouraging their own domestic manufacturers,"

 PTI government has provided undue financial advantages to the foreign suppliers as
the imported raw materials have become cheaper than the locally produced raw
materials.
the domestic industry has no chance to compete with imported raw materials.
, since the entire sector was zero-rated, the domestically produced goods had a commercial
edge on imports because of rapid availability and assurance of timely delivery and quality. In
this situation, the EOUs have started giving preference to procure imported input goods
which are available to them without payment of custom duty, federal excise duty, income
tax and the sales tax,

 this discriminatory treatment between the imported and the locally produced goods
has pushed the local chemical units towards destruction, threatening thousands of
the workers to be unemployed and also increasing further pressure on precious
foreign exchange reserves available to the country

BR Jan 2020

Allama Iqbal Industrial State will be set up with the help of china and will include many
industries including chem

Setting up the basics- chemical sector (BR)

BR 2018

 Pakistan's chemical sector is less than 2 percent of the LSM with total annual
revenue of less than $3 billion. India set up its first cracker facility in the 1990s and
 now has over 7 naphtha crackers, whereas the Pakistan Chemical Manufacturers'
Association has been struggling to get even one set up. The venture is as yet in the
feasibility report stages and has been so for years.
 Cheaper imports from countries like china, absence of naphtha cracker has led to
decline in chemical production

BR 2017

 While a naphtha cracker would be the biggest boon to Pakistan's chemical industry
(Read BR Research's “Importance of a naphtha cracker" published 27 December,
2017) in the long run, the new auto manufacturers setting up shops in Pakistan in
the short run would help increase the chemical sector's production since many car
parts are made of polymers.