Professional Documents
Culture Documents
Consultant Expert DR Mohamed Seif Al Den Taha
Consultant Expert DR Mohamed Seif Al Den Taha
Technology
Management
International
(Pvt) Ltd
(TECHMA)
Final Report
Sponsored By
Prepared By
Technology Management International (Pvt) Ltd
(TECHMA)
31/11-A, Abu Bakr Block New Garden Town, Lahore
Tele: (042) 5881460 Fax-Cum-Tel: (042) 5881718
E-Mail: techma@Brain.net.pk
2010
TABLE OF CONTENTS
Continued…….
Page 1 of 2
CHAPTER 4
4.1 Modernization of the national innovation system for chemical 1
industry development in Pakistan.
• Limitations of Pakistan’s N.I.S. 2
• The scope of Engineering Development Board with additional 4&5
responsibility for technology development and proposed
structure of Technology Development Board.
4.2 The role of the national committee in research and technology 5
development.
4.2.1 The current status of R&D in Pakistan. 6
4.2.2 National committee for research and technology 7
development.
4.3 National committee for the development of software and hardware 10
for the commercialization of technologies.
4.4 National committee for the development of technology policy and 13
investment planning.
4.5 Human resource development. 15
4.6 Integrated plan for the development of a national innovation 16
system.
4.7 Industrial master plan. 20
CHAPTER 5
Profiles of Present Secondary Chemical Industries of Pakistan.
(Section 1) Caustic soda 1-11
(Section 2) Soda ash & sodium bicarbonate 12-19
Section -3) Petrochemicals 20-37
CHAPTER – 6
Proposal For The Future Development Of Secondary Industries In Pakistan 1-5
CHAPTER – 7
Industrial Trade Policies
7.1 Imports, tariff and custom duties. 1
7.2 Tariff escalation, description and peaks. 2
7.3 Other imports duties/taxes. 3
7.4 Competitiveness of exports from Pakistan. 4
CHAPTER 8
Conclusions and Recommendations. 1-5
Attachments
Annexure “A” References 1-3
Page 2 of 2
ACKNOWLEDGEMENTS
Dr Waheed M. Butt
EXECUTIVE SUMMARY
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 and (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. The secondary sector industries form the basis for the
proposed “Chemical Industry Development - Vision 2030”.
Primary sector industries which provide feedstocks for the development of secondary
sector chemical industries, as well as other alternative sources of feedstocks consist of:
(ii) Natural gas based chemicals, which consist of methanol and ammonia. These can
also be used for the production of a large number of secondary chemicals.
(iii) Metallurgical metals and non-metals based secondary chemicals and products.
(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 are divided between projects based on
sophisticated technologies, and those based on medium and less sophisticated
technologies.
(iv) Reliance on the development of resource based, low technology, labour intensive
products for export.
(i) Pakistan to create its own capability and achieve self-reliance in project design,
engineering and the construction management required for the commercialization
of technologies.
(ii) To develop capability in the production of medium and high technology based
chemicals for export, alongside to the present industrial structure based on low
technology resource based products.
By comparison, economic growth in Southeast Asian countries from the 1960s onwards,
and in India, China and other late comers from the 1980s, was driven by their export-
oriented industrialization policies. All these countries introduced market reforms and
provided various incentives and subsidies in order to enhance their exports of
manufactured goods. In addition, these countries also developed their own technology
and engineering infrastructure by virtue of which they achieved self-sufficiency in the
utilization and commercialization of their technologies. As a result, they have achieved
strong annual average growth rates of between 8-11% over the past three decades.
Traditionally, exports from Pakistan have been dominated by goods produced with low
technology, resource based feed stocks, such as textiles, cotton, readymade garments and
leather. These comprise about 60% of total exports. The composition and share in exports
of medium and high technology based products, comprising chemicals, petrochemicals
and other manufactured products is very small and has fluctuated between 8-10% of total
exports from Pakistan. Conversely, Pakistan has a very high dependence of imports of
high value-added goods, which are more expensive. 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
Pakistan has only developed its basic industries, consisting of refineries, fertilizers,
cement, sugar, polyester fibers and some other petrochemical based polymer industries,
to fulfill local demand. These industries have been predominantly developed by foreign
engineering corporations, which were awarded contracts on turnkey basis. 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. This
dependence on the production and exports of low-valued added goods has held back
Pakistan’s economic performance and revenue-earning potential. By comparison, South
and Southeast Asian countries put special emphasis on the development of high
technology goods for export. They achieved this through trade liberalization, but their
governments’ also introduced industrial policies that focused on the maintenance of
macroeconomic stability, the provision of industrial and technology infrastructure,
improvements to market institutions and high levels of public investment. These
countries established public organizations which supported production activities, but they
also relied on private firms for the success of their industrial policies.
For example, China, which retains its socialist form of governance, introduced market
reforms and advocated the so-called Open Door Policy. It also created two large public
sector corporations: China National Petroleum Corporation (CNPC), for the production
and exploration of oil and gas; and China Petrochemical Corporation (SINOPEC) for the
development of its petrochemical industry. China also created Petro-China as a Holding
Company, which offered its shares on international markets. The value of this company
was estimated at US$100 billion in 1999, but has since risen to US$1.1 trillion in 2008.
The salient features of China’s public private partnerships (PPPs) is that the public sector
is the major shareholder in the development of its capital intensive industries, whereas the
private sector is the majority equity partner in the development of secondary 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.
We propose that the scope of the Engineering Development Board should be enhanced
and given the additional responsibility to modernize and strengthen the NIS as the basis
for technology development. In order to achieve this objective, three committees should
be established under the direction of a Technology Development Board (which will be an
enhanced Engineering Development Board):
(ii) A National Committee for the development of software and hardware for the
commercialization of technologies.
The role of the National Committee for research and technology development will be to
foster linkages between universities, R&D institutions and the chemical industry. Various
tasks to be undertaken by this committee will include the formation of sub-committees
for different sectors of the chemical industry; identification of problems of each sector;
selection of R&D teams from universities, industry and R&D institutes for
multidisciplinary research; continual appraisal and economic evaluation of laboratory and
pilot scale work; and selection and adoption of technologies for commercialization.
The successful utilization of various components of technology will depend on the ability
of the government to foster PPPs with the involvement of industrial and venture capital
institutions and a vibrant entrepreneurial class.
We suggest that a National Committee for the development of technology policy and
investment Planning should be established for:
Profiles of various sectors of existing chemical industries in Pakistan have been prepared.
These consist of World’s present and projected production, World trade, local production
in Pakistan, local market size, local demand, imports, future prospects for each sector of
industry, SWOT analysis with special references to weaknesses, threats and opportunities
as well as present tariff structure on Pakistan.
Proposals for the future developments of Secondary Industries in Pakistan have been
prepared and suggestions for the development of secondary chemical projects based on
locally available as well as imported materials have been made. The proposed industries
have been divided into various sectors consisting of minerals, metallurgical, agro-based
alternate sources of energy, oils and fats and petrochemicals based projects. A number of
potential projects in each sector have been proposed and it is suggested that EDB initiate
the development of feasibility studies on each of these projects for their future
implementation.
An integrated plan for development of NIS has been proposed and various other
requirements consisting of the application of computational technologies, human resource
requirements, and the development of coherent industrial policy are also considered
necessary. 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 in order to promote investment in various sectors of
chemical industry. The development of a NIS on international standards will provide tens
of thousands of job to Pakistan’s highly qualified manpower.
The chemical industry comprises the companies that produce industrial chemicals. It is
central to the modern world economy, as it converts raw materials into more than 70,000
different products.
The chemical industry is more diverse than virtually any other industry in the world. Its
products are omnipresent. Chemicals are the building blocks for products that meet our
most fundamental needs for food, shelter and health, as well as products vital to the high
technology world of computing, telecommunications and biotechnology. They are used to
make a wide variety of consumer goods, and are also inputs in agriculture,
manufacturing, construction and services industries. In particular, chemicals are a
keystone of world manufacturing, as they are an integral component of all manufacturing
sub-sectors, including pharmaceuticals, automobiles, textiles, furniture, paint, paper,
electronics, construction and appliances. It is difficult to fully enumerate the uses of
chemical products and processes, but the following nomenclature gives some indication
of the level of diversity:
The marketing of the chemical business can be divided into a few broad categories,
including basic chemicals (about 35-37% of US dollar output), life sciences (30%),
specialty chemicals (20-25%) and consumer products (about 10%).
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Chapter – 1 Page 1 of 1
BASIC CHEMICALS or “commodity chemicals” are a broad chemical category,
which include polymers, bulk petrochemicals and intermediates, other derivatives
and basic industrials, inorganic chemicals and fertilizers. Polymers--the largest
revenue segment, at about 33% of the basic chemicals US dollar value--include
all categories of plastics and man-made fibers. The major markets for plastics are
packaging, followed by home construction, containers, appliances, pipe,
transportation, toys and games. The largest volume polymer product, polyethylene
(PE), is used mainly in packaging films and other products, such as milk bottles,
containers and pipes. Polyvinyl chloride (PVC), another large volume product, is
principally used to make pipes for construction markets, as well as siding and, to a
much smaller extent, transport and packaging materials. Polypropylene (PP),
which is similar in volume to PVC, is used in markets ranging from packaging,
appliances and containers, to clothing and carpeting. Polystyrene (PS), another
large-volume plastic, is used principally for appliances and packaging, as well as
toys and recreation. The leading man-made fibers include polyester, nylon,
polypropylene and acrylics, with applications including apparel, home
furnishings, and other industrial and consumer use. The principal raw materials
for polymers are bulk petrochemicals.
Other derivatives and basic industrials include synthetic rubber, surfactants, dyes
and pigments, resins, carbon black, explosives and rubber products. They
contribute about 20% to basic chemicals’ external sales.
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Chapter – 1 Page 2 of 2
Inorganic chemicals (about 12% of revenue output) are the oldest of the chemical
categories. Products include salt, chlorine, caustic soda, soda ash, acids (such as
nitric, phosphoric and sulfuric), titanium dioxide and hydrogen peroxide.
Fertilizers are the smallest category (about 6%) and include phosphates, ammonia,
urea and potash chemicals.
LIFE SCIENCES (about 30% of the dollar output of the chemical business),
include differentiated chemical and biological substances, pharmaceuticals,
diagnostics, animal health products, vitamins and crop protection chemicals.
While much smaller in volume than other chemical sectors, their products tend to
have very high prices--over US$10 per pound--with research and development
(R&D) spending at 15-25% of sales. Life science products are usually produced
to very high specifications and are closely scrutinized by government agencies
such as the US Food and Drug Administration (FDA). Crop protection chemicals,
about 10% of this category, include herbicides, insecticides and fungicides.
The chemical industry has shown rapid growth for more than fifty years. The fastest
growing areas have been in the manufacture of synthetic organic polymers used as
plastics, fibres and elastomers. Historically and currently the chemical industry has been
concentrated in three areas of the world: Western Europe, North America and Japan (the
so-called Triad). The EU remains the largest producer, followed by the US and Japan.
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Chapter – 1 Page 3 of 3
The traditional dominance of chemical production by the Triad is now being challenged
by changes in feedstock availability and price, labour and energy costs, differential rates
of economic growth and environmental pressures. Instrumental in the changing structure
of the global chemical industry has been recent rapid economic growth in China, India,
Korea, the Middle East, Southeast Asia, Nigeria, Trinidad, Thailand, Brazil, Venezuela,
and Indonesia.
The outstanding success of the global chemical industry is largely due to scientific and
technological breakthroughs and advances, facilitating the development of new products
and processes. The US chemical industry now spends about US$17.6 billion annually on
R&D. In fact, according to study by the Institute for the Future (IFTF), the chemical
industry is one of the eight most research-intensive industries. The scientific and
technical research of these industries makes our lives safer, longer, easier and more
productive. When one reviews the contributions of the chemical industry to our
civilization, it becomes clear that rather than any single individual invention or
technological breakthrough, it has been the industry’s overall commitment to R&D that
has been its most significant legacy.
Investment in R&D is the single greatest driver of productivity increases, accounting for
half or more of all increases in output per person. R&D is the source of new products that
improve our quality of life, and new processes that enable firms to reduce costs and
increase competitiveness. As we look to the future, it is apparent that continued
investment in technology is necessary for industry to meet the needs and expectations of
future generations.
Reaching the goals of “Chemical Industry Development - Vision 2030” will require
Pakistan to build its technology infrastructure, consisting of investment in technology
development, computer aided design, engineering, plant and equipment manufacturing,
construction and marketing management. These areas of development have been grossly
neglected in the past and are the major reasons for the present plight of the chemical
industry in the country.
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Chapter – 1 Page 4 of 4
The industrial sector drives the global economy, collectively transacting almost US$3
trillion per annum. An industry is a collection of companies that perform similar
functions. Industry can be used to refer to all company groups, or as being a set of entities
that utilize productive forces to convert a simple input into a processed final product. The
size of various industries varies by country, level of development and external demand.
For the purpose of the “Chemical Industry Development – Vision 2030”, this industry is
divided into:
The Primary sector industry generally involves the conversion of natural resources into
primary products. These are large, highly sophisticated, technology-based, capital
intensive projects consisting of:
(ii) Natural gas based projects for the production of ammonia, methanol, fertilizers
and associated products.
(iii) Mineral based industries consisting of cement, limestone, gypsum, sand and salt.
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Chapter – 1 Page 5 of 5
Secondary Sector Industries
The principal objective of Secondary sector industries is to provide the connective link
between products and materials produced by Primary industries, which are of practical
use to the national economy. This implies that the Secondary industries rely on the
Primary industries for feedstocks and raw materials for use in manufacturing, processing,
blending, fabricating plants for petrochemical intermediates, polymers, plastics, steel,
non-ferrous metals, minerals, agricultural and miscellaneous products. These industries
use medium- to high-sophisticated technology, and range from light to medium
categories.
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Chapter – 1 Page 6 of 6
CHAPTER 2
2. POTENTIAL FOR THE DEVELOPMENT OF SECONDARY CHEMICAL
INDUSTRIES BASED ON FEEDSTOCKS DERIVED FROM PRIMARY
INDUSTRIES
2.1 Feedstocks Derived from Primary Industries for the Potential Development
of Secondary Chemical Industries
• Metallurgical plants for the production of iron, steel, and non-ferrous metals.
• Other mineral projects consisting of acid and alkali industries, and cement and
glass plants based on limestone, gypsum, rock salt, sulphur and silica.
Natural gas and crude oil are referred to collectively as petroleum. Crude oil
consists of the heavier constituents that naturally occur in liquid form. Natural gas
refers to the lighter constituents of petroleum that naturally occur in gaseous form,
either on its own as free gas, or in association with crude oil.
In the second stage the off gases and naphthas are further processed into two
separate operations to produce Petrochemical intermediate chemicals or
monomers as follows:
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Chapter – 2 Page 2 of 23
Petrochemical Feedstocks
Crude Oil
To
Petroleum Refinery
Atmospheric
Distillation
Petrochemical
Feedstock
Aromatics Olefins
Fig 2.1
Refinery off gases, naphthas or gas oils are reformed at high temperatures in the
presence of steam to produce monomers (ethylene, propylene and butylenes).
These are gases at ordinary temperatures and pressures and can only be
transported at high pressures and low temperatures as liquids under refrigerated
condition. These are preferably processed further at site to produce secondary
petrochemical products or polymerized into polymers, such as polyethylene,
polyvinylchloride, polystyrene, ethylene glycol and many other secondary
chemicals as illustrated in Fig 2.2 and 2.3.
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Chapter – 2 Page 3 of 23
STEAM CRACKING OF
NAPHTHA / GAS OIL
NAPHTHA / Ethylene
ASSOCIATED GAS /
GAS OIL REACTOR
Steam to Feed
ratio 0.25 to 0.9 Propylene
Temperatures
STEAM 820 to 840oC
Butylenes
Fig 2.2
FORWARD CREATION
POLYETHYLENES LDPE,HDPE STAGE II
POLYPROPYLENE POLYMERIZATION OF PRIMARY CHEMICALS FOR
POLY VINYL CHLORIDE THE PRODUCTION OF SECONDARY CHEMICALS
POLYSTYRENE AND POLYMERS.
SBR (MEDIUM TECHNOLOGY BASED PROCESSES).
ETHYLENE GLYCOL
POLY VINYL ACETATE
Fig 2.3
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Chapter – 2 Page 4 of 23
Other Olefins Based SecondaryChemicals
Naphtha
Steam Cracker
(Olefins)
Fig- 2.3(a)
Naphtha and gas oil is also catalytically reformed at high temperatures in the
presence of catalysts to yield aromatic intermediate chemicals, such as benzene,
toluene and xylenes (Fig 2.4). These are liquids at ordinary temperatures and
pressures and can be easily transported to desired locations where they are used as
raw materials in the production of a variety of secondary chemical products as
shown in Fig. 2.5.
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Chapter – 2 Page 5 of 23
CATALYTIC REFORMING OF NAPHTHA
(AROMATIZATION REACTION)
NAPHTHA /
ASSOCIATED GAS / Benzene
GAS OIL
CATALYTIC
REACTOR Toluene
STEAM Xylenes
Fig-2.4
`
Aromatics Based Secondary Chemicals
Naphtha Catalytic
Reformer (Aromatics)
Fig 2.5
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Chapter – 2 Page 6 of 23
2.2 Natural Gas Based Chemicals
Natural gas is a very valuable resource, not only for use as energy, but also for the
production of chemicals. It has been used commercially as a fuel for hundreds of
years. The production, processing and distribution of natural gas has become an
important segment of the world economy and is a major factor in the production
of chemicals in global markets.
Natural gas processing plants are designed to produce certain valuable products
over and above those needed to make the gas marketable. Plants are also designed
to recover elemental sulphur which is the starting raw material for the production
of many secondary chemicals.
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Chapter – 2 Page 7 of 23
Household Gas
Fig -2. 6
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Chapter – 2 Page 8 of 23
FIG-2.7
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Chapter – 2 Page 9 of 23
2.3 Alternative Feedstocks for the Production of Commodity Chemicals
The uncertainties about the peaking of available reserves of fossil fuels, and rising
prices of petroleum and natural gas, have spurred the chemical industry to
examine alternative feedstocks for the production of commodity chemicals. Over
the last two decades alternatives to conventional petroleum and natural gas
feedstocks have been developed. These feedstocks include coal based gasification
and liquefaction processes; and renewable resources such as bio-mass, stranded
natural gas from unconventional reserves, heavy oil from Tar sands or oil shale.
These sources of alternative feedstocks are in the process of development for
highest volume production of commodity chemicals in Europe and the US. The
technology for their utilization is in the process of development, in order to make
these processes more efficient and economically compatible with petroleum based
technologies. The status of various available feedstocks and the technological
development for their exploitation for the production of secondary chemicals is as
follows:
Coal
Substantial world coal reserves make it an attractive alternative to natural gas and
petroleum. The technologies for large scale processing of coal are at present
available in South Africa and China. However, a major concern about the
utilization of these technologies is the variability in feedstock composition and the
presence of impurities which poison the catalysts used in the processing of coal.
Coal Gasification
Commodity chemicals can be produced through the gasification of coal. Because
of the large domestic reserves of coal in Pakistan, this feedstock option needs to
be exploited. Coal gasification for application, including the production of
chemical feedstocks, is already widely practiced worldwide. These plants
generate feedstocks for chemical production, closely followed by the Fischer
Tropsch process for the production of organic chemicals.
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Chapter – 2 Page 10 of 23
The gasification process starts with the production of synthesis gas in a gasifier,
followed by the production of a mixture of carbon oxides and hydrogen.
Ammonia, methanol, alcohols and aldehydes are produced by Oxo Synthesis. The
Fisher Tropsch process is used to produce a variety of secondary chemicals.
Coal Liquefaction
Coal can also be liquefied directly, without going through a Syngas step. This
process is called the “Coal to Liquid” or CTL process and is well proven.
Liquefaction uses liquid distillation and hydrogenation, where hydrogen is added
to coal and water slurry. The slurry increases the Hydrogen/Carbon (H/C) ratio to
a crude oil level and removes impurities such as sulphur.
Bio-Refinery
In addition to their utilization for energy production, some bio based chemicals
that have potential for large scale manufacture include carboxylic acids and
glycols. Other areas of development include fermentation of sugars,
decomposition of cellulose, high temperature pyrolysis, and bio-refining of wood
and waste materials. However widespread use of feedstocks will require sustained
research and development(R&D) in a variety of fields such as plant science,
microbiology, genomics and catalysis. In view of the impurities, variability of
feedstock composition, distributed supply, scalability and pathways for the
breakdown of cellulose, the development of process technology will have to be
undertaken and / or adapted to local conditions by each country, in order to
exploit the utilization of bio-mass feedstocks for economic advantage.
Methane from anaerobic fermentation can be generated from animal manure and
sewage treatment, as well as from landfills. The potential for anaerobic
fermentation as a source for useable methane, rather than a source of pollution,
will require development work leading to improvements in process control,
operating efficiencies and rate of digestion, targeting small scale technologies.
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Chapter – 2 Page 12 of 23
2.4. Feedstocks Derived from Metallurgical Plants and Polymers, Materials
Technology and Metallurgical Processes
Materials technology is one of the many areas targeted by the chemical industry.
Materials play a critical role in the economic development and growth of
chemical process industries. New materials technology is an essential part of the
industry’s strategy for achieving its vision. Materials contribute a large amount to
industry revenue, and represent a high growth potential for industry.
Metallurgical Industry
The iron and steel industry is classified into three important primary products
according to the order of processing from iron ore to the finished products. The
iron ore is calcined and mixed with limestone and coke and introduced into a
Blast furnace. The preheated air is fed to the bottom of the furnace. The ore is
reduced to iron to produce Pig iron.
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Chapter – 2 Page 13 of 23
Pig iron is refined by different processes to produce iron castings or billets, rolled
wrought iron and rolled/forged steel by three different processes as illustrated in
Fig 2.8.
Fig-2.8
The primary products of the iron and steel industry, which consist of iron
castings, rolled wrought iron, and rolled and forged steel, are the feedstock for a
very large number of downstream secondary industries.
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Chapter – 2 Page 14 of 23
Non-Ferrous Metals
Non-ferrous metals are produced through two basic operations. In the first
operation, the ores are subjected to metallurgical processes to produce basic
metals consisting of large blocs or bars. In the second operation, the metal is
smelted and refined. The secondary smelting and refining of nonferrous metals
lead to the production of aluminium, copper, lead, nickel, silver, gold, tin and
zinc. These metals are used in wide variety of secondary chemical manufacturing
industries, such as ammunition, beverage cans, coins, automobiles and household
appliances.
Aluminium, the most widely used nonferrous metal, possesses several positive
attributes, such as a light weight, corrosion resistance, and high electrical and
thermal conductivity, which makes the metal suitable for a variety of applications.
Container and packaging manufacturers use aluminium, while other major end-
use products include the transportation sector, the building and construction
sector, and the electrical sector.
Lead is primarily used for the manufacture of storage batteries, which in turn are
incorporated into automobile ignition starters, un-interruptible power supplies for
computer systems, and standby power supplies for emergency lighting systems
and telephones. Other market sectors that purchase lead include paint and glass
manufacturers, and building products manufacturers.
Zinc is primarily used to galvanize products found in the automobile, steel and
construction industries, but a greater percentage of secondary zinc is used to
produce brass and bronze, as well as assorted chemicals. Additional applications
include the blending of zinc-based die-cast and brass alloys.
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Chapter – 2 Page 15 of 23
Composite Materials
Over the past few years, advances in the production of composite materials,
including mixtures of polymers, fibers, metals and ceramics, have extended the
range, performance and applications of these materials. These are made up of
individual materials referred to as constituent materials. There are two categories
of constituent materials designated as matrix and reinforcement.
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Chapter – 2 Page 16 of 23
2.5 Other Mineral Based Projects Consisting of Acid and Alkali Industries,
Cement and Glass Plants Based on Limestone, Gypsum, Rock Salt, Sulphur
and Silica
In view of the long history of development of industries in this sector, the process
technologies are well-known locally. However, the design, engineering and
procurement of critical plant and equipment are predominantly carried out by
foreign engineering companies.
Agriculture is the largest sector of the economy and is the source of livelihood of
almost 45% of the total employed labour force in the country.
Cotton is the most important non-food crop and feedstock for the production of
natural fiber for the manufacture of textile products. Cotton fiber is also blended
with polyester and viscose fibers. The textile and clothing industry has been the
main driver of Pakistani exports for the last sixty years, in terms of both foreign
currency earnings and job creation. The textile industry flourished under official
patronage, but lost its advantages in the post quota regime. Its share in exports has
declined from 66% in 2005 to 53.7% in the current 2008-09 financial year.
The textile industry is based on relatively low to medium technology, but in spite
of this Pakistan has spent US$7.5 billion on the import of textile machinery over
the past ten years (1999-2009). Pakistan did not make any effort to adopt
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Chapter – 2 Page 17 of 23
imported technologies for the manufacture of textile machinery by reverse
engineering. In view of these shortcomings, the textile industry has continuously
suffered productivity losses due to machinery breakdowns and its inability to cope
with operational problems. Pakistan is now facing competition from China, India
and Bangladesh, in view of their better quality products, higher productivity and
other economic advantages.
Sugarcane is an important cash crop and is a valuable feedstock for the production
of sugar and other downstream industries, such as industrial alcohol, chip board
and paper.
Molasses is a by product of the sugar industry and is the starting raw material for
the production of industrial alcohol, which is used as a source of energy for
automobiles, as well as the production of organic chemicals, such as aldehydes,
acetone, acetic acid, acetic anhydride, isophoron, citric acid, glycerol, yeast and
many other derivatives for pharmaceutical and plastic industries.
The fruit industry is very diversified and consist of juices, soups and sauces, baby
food, bakery products, confectionary and tomato products. The technology for the
processing of fruit is becoming more sophisticated because of the high demand
for quality products. The industry is required to produce food products both
economically and profitably, and this depends upon efficient processes. At the
same time, these processes must handle the material in such a way that the final
product is attractive to the consumer.
The fruit industry and its downstream products have considerable export
potential.
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Chapter – 2 Page 18 of 23
Natural Dyes
Vegetable dyes are eco-friendly and their use is increasing, especially for dyeing
wool, carpets, silk and cotton.
The common sources of vegetable dyes are parts of plants, such as leaves,
flowers, fruit, seeds, barks, and the roots of dye yielding plants. The cultivation of
certain trees also yield dye material. Therefore, the utilization of dye yielding
plants and trees will boost the agro-based industry especially in rural areas,
leading to rural development and employment creation. Pakistan imports
vegetable dyes from India despite the fact that the raw materials for their
production are available in Pakistan. Dyes and pigments constitute the largest
segment of the industry, with the world’s present value estimated at about US$16
billion per year.
Major developments in herbal medicines and beauty products are now taking
place in China, South Korea, Canada and the US, in addition to India. It is
estimated that the global market for herbal products now stands at US$62 billion
per annum.
Pakistan has a vast variety of flora and fauna especially in the northern areas,
Azad Kashmir and the foothills of the Himalayas, which need to be explored for
beneficial exploitation of these resources.
________________________________________________________________________________________
Chapter – 2 Page 19 of 23
India has established a Technology Development Board which provides financial
assistance to R&D establishments concerned with the development and
commercialization of indigenous technology for herbal products for wider
domestic applications.
Conventional oils derived from cotton seed, rapeseed and corn are now processed
and utilized for the production of bio-fuels in the US and other countries.
2.7 Sources of Raw Materials and Process Technologies for Chemical Industry
Development in Pakistan
Crude Oil and Natural Gas are the feedstocks for the primary industries,
consisting of petroleum refining; fertilizers; iron, steel, and other metallurgical
projects; cement; and textile industries. The development of these industries is
predominantly based on imported technologies. The design and detailed
engineering, and supply of critical plant and equipment, is carried out by foreign
engineering corporations, which also assist in the construction of facilities,
training of operating staff, and the commissioning of process plant and
equipment.
________________________________________________________________________________________
Chapter – 2 Page 21 of 23
Projects based on high / medium sophisticated technologies
Pakistan has not been able to create its own capability for technological and
engineering infrastructure for the exploitation and commercialization of local or
imported technologies.
________________________________________________________________________________________
Chapter – 2 Page 22 of 23
The face and scope of the world’s chemical industry is changing. There is
continual emphasis on the development of new materials and processes based on
cheap, renewable feedstocks, consisting of coal, bio-mass and composite
materials, in addition to conventional feedstocks. The objective of the
“Development of Chemical Industry - Vision 2030” is for Pakistan to create its
own technological and engineering capability in order to make itself self-
sufficient by progressively reducing its dependence on foreign engineering
corporations, which are at present involved in the commercialization of chemical
and industrial projects. Such strategies were pursued by ASEAN, India and China
during the initial stages of their development, by virtue of which these countries
have already achieved the status of newly developed economies (NIC).
It should also be acknowledged that the creation of these facilities will create
employment opportunities for highly qualified manpower (engineers, scientists,
technologists, economists etc.). Currently, the lack of such opportunities is
responsible for the continual “brain drain” from Pakistan to other countries.
________________________________________________________________________________________
Chapter – 2 Page 23 of 23
CHAPTER 3
THE PRESENT STATUS OF THE CHEMICAL INDUSTRY
Historical Background
The development of the chemical industry in Pakistan started in the early 1950’s.
Since Pakistan did not have an industrial base, governments gave preference to
import substitution over export-oriented policies in their strategic plans for future
development. In spite of rather poor available resources, Pakistan made a
significant start and was considered a promising developing country in 1960’s.
Pakistan continued to follow an inward-oriented import-substitution policy until
the end of 1990’s, which hampered the development of export-oriented industries.
Pakistan did not appreciate the advantages associated with trade liberalization
until late in 1990s and supported highly protectionist trade policies. It delayed
trade liberalization and tariff rationalization until the end of 1990’s. The chemical
and the manufacturing sectors have also been adversely affected by various
factors, such as acute energy shortages and poor structural policies. Their present
share in 2008/09 GDP is estimated at 18.4%, compared with a contribution of
23% in 2006-07.
Existing Status
¾ Basic chemicals both inorganic and organic such as acids, alkalies, salts,
ethylene, propylene, benzene, toluene, xylene etc.;
Chapter – 3 Page 1 of 1
¾ Chemical products used in further manufacturing i.e. intermediates such as
pure Terephthalic acid, phthalic anhydride,
¾ Finished chemical products for end use or ultimate consumption; synthetic
fibers i.e. polyester, PVC, polyethylene, polypropylene, polystyrene etc.
¾ Pharmaceuticals
¾ Pesticides
¾ Dyes & Pigments
¾ Soaps & Detergents
¾ Paints & Varnishes
¾ Synthetic Fiber
¾ Plastics & Resins
¾ Rubber Tyres & Tubes
¾ Textiles Auxiliaries
¾ Essential Oils & Perfumes
Chapter – 3 Page 2 of 2
¾ Highly Cost Intensive project
¾ Sophisticated technology involved
¾ Export market limitations
¾ Insufficient current tariff spread
However there are some alternate routes to produce basic petrochemical building
blocks, these are;
¾ Gasification of Coal
¾ Dehydrogenation of Associated Gases
¾ Cracking of Natural Gas
Each route has its own limitation, however recently some developments are taking
place to produce synthesis gas and ethylene from natural gas cracking. This
project surely opens the gateway for the development of Petrochemical industry
in Pakistan, which will support the local chemical & allied products industries in
meeting their raw materials requirements and to save the valuable foreign
exchange.
Besides the imports of most of the raw material & intermediate for these sectors,
Pakistan succeeded to develop the downstream allied chemical industries to meet
most of the local demands. The example of this development is obvious in
synthetic fibres, soaps & detergent, dyes & pigments, Paints & Varnishes, while
amongst intermediates Pakistan has sufficient capacity for Pure Terephathalic
Acid (PTA) and Poly Vinyl Chloride (PVC). However still the imports of
chemicals and allied industries stood around 20%, which is significant for a small
economy of Pakistan.
Chapter – 3 Page 3 of 3
3.2 Regional Scenario
Trailing behind the “four little dragons” are four ASEAN countries--Indonesia,
Malaysia, Thailand and the Philippines. These four countries have also been
successfully increased their exports of high value-added goods by following a
policy of trade liberalization and technology development.
There is widespread understanding that economies with liberal trade policies and
openness have higher economic growth rates. Trade liberalization, together with
complimentary policies and structural reforms, results in substantial
improvements to the business environment, fosters market competition and helps
technology improvement and upgrading. These strategies boost productivity and
the optimum utilization of resources which are absolutely essential for increasing
exports and supporting economic performance.
Chapter – 3 Page 4 of 4
3.3 The Structure of Pakistan’s Trade
6000 5,718
5,166
5000
4,362
4,133
4000 3,599
2,788
3000
2000
768
1000 400 472 367 538 411
118 253
0
2002-03 2003-04 2004-05 2005-06 2006-07 2007-08 2008-09
Imports Exports
Above graph shows the consolidated figures for imports & exports such as chemicals,
fertilizers, plastics, rubber, medicines, dyes & pigments, soaps & detergents, and
specialty chemicals for the period from 2002-03 to 2008-09. Imports have increased
from 768 Million US $ in 2002-03 to 5,166 Million US $ in 2008-09 and on the other
hand our exports also showed an increase from 118 Million US $ in 2002-03 to 411
Million US $. Share of chemicals in our total imports is about 15% while its share in
exports is about 2.3%. The total imports of plants and equipment used for the
manufacture of chemicals contributes about 23% of overall imports of Pakistan.
Collective share of these two categories i.e. plants/equipments and chemicals is about
38% of country’s overall imports and among major contributors of country’s imports.
Pakistan’s trade deficit was about ---- Billion US $ which has been increased to 17
Billion US $ in the year 2008-09.
Chapter – 3 Page 5 of 5
The structure/composition of Pakistan’s exports of chemicals for the year 2008-09 is
depicted below:
Chemical Exports of Pakistan ‐ 2008‐09
Total Exports = 513 Million US $
Petrochemicals
Perfumes & Cosmetics 4.0% Pharmaceuticals
2.6% 28.3%
Other Specialty
Chemicals
10.7%
Inorganic Chemicals
4.5%
Fertilizers
0.1%
Dyes & Pigments
1.4% Plastics
Coatings & Inks 41.6%
3.5% Soaps & Detergents
3.4%
Plastics stand top export with a share of 41.6%. Second is pharmaceutical with a healthy
share of 28.3%. Third largest one is of specialty chemicals contributes about 18.2% of
which perfumes & cosmetics 2.6%, coatings & inks 3.5%, dyes & pigments 1.4% and
other specialty chemicals share is around 10.7%. Inorganic chemicals have comparatively
very low exports of 4.5% while Pakistan have significant surplus available for exports
most promising products in this sub-sector are soda ash, caustic soda, chlorine, calcium
chloride, bleaching powder etc. need be encouraged. Petrochemicals share is about 4% in
which major contributors are phthalic anhydride, dioctyl orthophthalate etc. soap &
detergents contributing about 3.4% while share of fertilizers is negligibly small i.e. 0.1%.
Traditionally, exports from Pakistan have been dominated by textiles, cotton, ready-made
garments and leather products. These comprise about 60% of total exports from Pakistan,
and are predominantly manufactured by low technology and labour intensive processes.
Chapter – 3 Page 6 of 6
The share of medium- to-high value-added products--such as chemicals, petroleum,
petrochemical intermediates and manufacturing—in exports is very small. In terms of the
composition by technology classification, the share of exports of raw materials, and
resource-based as well as labour intensive and low technology products in 1985-2005 did
not show any improvement. These products contributed about 90% to total exports in
revenue terms from Pakistan. The share of exports of medium- to-high technology
manufactured products over the same period has declined from about 10% in 1985 to
about 8.3% in 2005. This indicates that despite following a policy of trade liberalization
in the late 1990s and early 2000s, Pakistan has failed to make any headway in
diversifying its exports, or enhancing its capability in the production of medium and high
technology export based products. By comparison, the global share of exports of raw
materials, and labour intensive and low technology products was estimated at about 37%
in 2005, while the global share of medium and high technology products has risen to
about 63%. These figures are recorded in Table 3.2.
Table 3.2
Chapter – 3 Page 7 of 7
Imports
Chemical Imports of Pakistan ‐ 2008‐09
6,436 Million US $
Perfumes & Cosmetics
Pharmaceuticals
1.4% Soaps & Detergents
8.5%
Other Specialty 1.7% Inorganic Chemicals
Chemicals 10.8%
10.2%
Coatings & Inks
1.1%
Dyes & Pigments
4.3%
Pesticides
2.2%
Petrochemicals
29.2%
Fertilizers
10.4%
Synthetic Rubber
1.2% Plastics
19.0%
The data for major imports in the period 2002-08 is recorded in Table 3.3. This table also
gives the consolidated figures for imports, such as chemicals, drugs, medicines, dyes and
colours for the same period. Their share of imports increased from US$1,921 million in
2002-03 to US$4,955 million in 2007/08, or about 12.3% of total imports. Similarly, the
total imports of capital plants; agricultural, transportation and communication machinery
and equipment; and manufactured products, increased from US$2,825 million in 2002/03
to US$11,283 million in 2007/08, or about 28.3% of total imports. These two categories
of imports together add up to more than 40% of total imports.
Chapter – 3 Page 8 of 8
Table – 3.3
MAJOR IMPORTS OF PAKISTAN
US$ (Million)
2002-03 2003-04 2004-05 2005-06 2006-07 2007-08
Chemicals & Related
1,555 2,078 2,709 2,990 3,194 4,181
1 Product
2 Drugs and Medicines 222 275 292 331 354 463
3 Dyes & Colours 144 160 187 223 238 311
4 Chemical Fertilizers 240 285 417 652 696 912
5 Electrical goods 217 258 356 502 536 702
6 Machinery 2,224 3,309 4,494 6,245 6,673 8,732
7 Transport Equipments 501 653 1,069 1,602 1,712 2,240
8 Iron and Steel 402 512 890 1,373 1,467 1,920
9 Iron and Steel Scrap 48 94 222 424 453 593
10 Manufacture of Metal 100 124 175 223 238 311
11 Tea 173 193 223 225 240 315
Synthetic & Artificial -Silk
92 118 130 546 583 763
12 yarn
13 Non-ferrous metal 30 34 40 123 131 172
14 Crude Petroleum 1,367 1,765 2,149 3,804 4,065 5,320
15 Petroleum Products 1,700 1,401 1,851 2,848 3,043 3,982
16 Edible Oils 539 613 703 746 797 1,043
17 Grains, Pulses & Flours 116 75 123 164 175 229
18 Other Imports 2,551 3,646 4,569 5,560 5,941 7,775
Total Imports 12,221 15,593 20,599 28,581 30,536 39,964
Source : Export Promotion Bureau
Chemicals (1+2+3+4) 2,161 2,798 3,605 4,196 4,482 5,867
Percentage of
Chemicals Group to 17.7% 17.9% 17.5% 14.7% 14.7% 14.7%
Total Imports
Chapter – 3 Page 9 of 9
In the past, medium and high intensive technology based chemical plants, such as
petroleum, cement, sugar, polyester fibers and other petrochemical based polymer
products were developed in Pakistan with the help of foreign engineering and
construction companies. However, Pakistan has failed to assimilate these technologies,
and use these either for the replication of these plants or in the development of associated
projects.
Rapid industrial development in Japan and the newly industrialized economics (NICs) of
South and Southeast Asia has resulted in these countries recording very high economic
growth rates since the 1960s. This was made facilitated by the development of industrial
policies designed to shift the industrial structure away from primary economic activities,
such as agriculture and textile manufacturing, to advanced chemical and manufacturing
industries.
Economists in the late 1970s and 1980s portrayed the industrial policies of NIC’s as a
new perspective on development and defined the role of the state to maintain
macroeconomic stability, provide industrial and technology infrastructure, improve
market institutions to enhance development, and redistribute the generated wealth. One of
the major reasons for the success of industrial policies in NIC’s was productive
investment--which formed a large percentage of GDP--with much of this investment
funding made by the public sector. The introduction of incentives and subsidies were also
used as an effective tool for resource allocation. The governments of NIC’s established
public organizations to support production activities, but relied primarily on private firms
for the success of their industrial policies. These governments, however, realized that the
industries whose development were deemed necessary for rapid industrialization could
only be nurtured with the intervention of the public sector. This is because most of the
industries they were developing—such as chemicals, petrochemicals and polymers etc--
required large scale investments which the private sector could not afford.
Chapter – 3 Page 10 of 10
In China, market reforms were introduced by Deng Xiaoping in 1978, along with its
Open Door Policy. Deng stated that if capitalism had something positive to offer, then
China should accept and exploit it to the best of its advantage.
T
he structure of China’s petroleum and petrochemical industry is shown in Fig 3.1. China
created two Public Sector Corporations: China National Petroleum Corporation (CNPC)
for the production and exploration of Oil and Gas; and the China Petrochemical
Corporation (SINOPEC) for the development of its petrochemical industry. China created
Petro-China as a Holding Company which offered shares on the international market,
with its value estimated at US$100 million in 1999. Petro-China’s value has now reached
US$1.1 trillion over a ten-year period. CNPC is now ranked one of the top petroleum
companies globally, as shown in Table 3.5.
Chapter – 3 Page 11 of 11
CNPC ranked as World’s Top 50 Petroleum Companies
The salient feature of China’s industrial policy is that the public sector has a large share
holding, while the private sector is given a small share in the equity, when developing
primary large-scale projects. Conversely, in the downstream secondary industries the
public sector has a minor shareholding, while private companies have a large equity
share. This is a good example of the importance and success of public-private
partnerships (PPAs) in the successful industrialization of the country. This is illustrated in
Table 3.6.
Chapter – 3 Page 12 of 12
Table – 3.6
The industrialization of Japan and South Korea was facilitated by the development of
multinational conglomerates, called Keiretsus and Chaebols. These corporate business
groups played a decisive role in the economies of their countries. The major
contribution of these conglomerates relate to their ability to create powerful vertical and
horizontal diversification of their businesses with the active participation of their
respective governments.
Under the present political climate in Pakistan, it is very difficult to attract foreign direct
investment, from not only developed countries, such as the US, Japan and Europe, but
also from the Middle-East. In view of these constraints, it is necessary for the government
of Pakistan to devise suitable policies to develop PPPs, in order to spur the development
of the chemical industry, which will cater to both domestic demand and exports. In this
endeavour large industrial groups such as Fauji Foundation, Dawoods, Engro and other
well known textile, cement and sugar groups should be invited to reinvest their proceeds
for the vertical or horizontal diversification of their businesses.
Chapter – 3 Page 14 of 14
CHAPTER 4
The NIS of any country is defined as the framework by which a country brings
about technological change. It includes many diversified elements and
participants involved in the development of the chemical industry. These consist
of research and development (R&D) and technology development institutions; the
infrastructure responsible for the commercialization of locally developed and
imported technologies; the structure of universities and educational and technical
institutions for human resource development; the government and regulatory
agencies; information networks; financial institutions; and domestic and
international markets. It emphasizes the synergistic strategies and complex
interactions between various stakeholders in an economic environment. The
development and enhancement of a NIS is therefore critical for the formation of
national technological policies and is also important for strategic technology
planning in Pakistan.
The past history of industrial development has shown that the highly
industrialized countries of the UK, France, Germany and the US, achieved their
status as industrialized nations after several centuries of continual endeavour.
Successive countries have, however, achieved their development goals in shorter
periods than those immediately preceding them.
Japan took a shorter time than the Europeans to achieve its status as an
industrialized country. But while Japan’s technological miracle spans over half a
Chapter - 4 Page 1 of 21
century, South Korea, which followed the Japanese model, achieved its
industrialized status in about 25-30 years, while other newly industrialized
countries (NIC’s) of Southeast Asia, such as Singapore, Taiwan and Hong Kong,
have also shown similarly remarkable progress in an even shorter time span.
Other countries like Indonesia, Malaysia and Thailand, as well as China, India
and Brazil, have exhibited what is termed as miracles. Their achievements have
also been spectacular and unparalleled in history.
The leap-frogging experience of China and many other NIC’s was not the result
of the so-called “invisible hand”. Their leaders took strategic decisions that were
at the time at variance with their comparative advantages (given their then levels
of economic development), but eventually led to the desired transformation.
These countries paid special attention to the development of their NIS, which
formed an important aspect of their economic structure and institutional setups,
which had a positive impact on human resource development, and also enhanced
and improved their systems of production, marketing and associated sub-systems.
These factors formed the basis of these countries’ innovative technologies.
Chapter - 4 Page 2 of 21
isolation and are completely divorced from each other’s activities. Unfortunately,
no effort has so far been made by the public or private sector to develop public-
private partnership in order to integrate the activities of various sectors of
economy.
One aspect of this model is designed to facilitate learning, train the labour force to
high technical standards, absorb locally developed or imported technology, and to
solve production problems related to energy and productivity improvements in the
chemical industry, by introducing reverse engineering techniques as a first step
towards the development of a NIS. This is a well-known technique through which
foreign technology may be acquired and assimilated by importing sophisticated
capital equipment. Machinery and equipment that have been designed and
manufactured by foreign engineering companies are based on modern technology
and have technological information embedded in them. These technology imports
have been used by NIC’s to produce high quality products through the application
of reverse engineering. Unfortunately, Pakistan has not been able to develop this
capability.
The textile industry is a prime example of this shortcoming, since it has been
importing textile machinery worth billions of US dollars every year without
taking any initiative to enhance its capability for modernization, or revamping its
textile machinery through the adoption of imported technologies by reverse
engineering techniques. Large industrial companies, such as refineries, fertilizer
and cement have also not taken any initiative to exploit these techniques.
For an economy competing at the global frontiers, its innovation strategy requires
a well developed infrastructure, a set of capability focused technology policies, as
well as an industrial environment that stimulates innovation and entrepreneurship.
Chapter - 4 Page 3 of 21
It is therefore, necessary to examine the role played by science and technology
policies in a country’s transition to an innovation based growth strategy, and
discuss the challenges Pakistan faces in restructuring its economic institutions in
order to improve R&D capabilities so as to encourage technology creation.
Process science and engineering technology (PS&ET) is the foundation for the
development of the chemical industry. It embodies the integration of facilities for
technology development, process design, detailed engineering, manufacturing of
capital plants and equipment, chemical plant construction and management.
Taken together, these provide the basis for manufacturing excellence and
sustainable competitive advantage, as well as employment opportunities for
highly qualified manpower. The development and application of PS&ET is rather
fragmented in Pakistan at present. In order to meet the goals of “Chemical
Industry Development - Vision 2030”, it is absolutely essential for Pakistan to
enhance its PS&ET capabilities, as this is an important component of a NIS. The
performance of various elements of this system in Pakistan have been critically
examined, and a coherent strategy for the integration of available facilities has
been proposed, in order to achieve the objectives of “Chemical Industry
Development - Vision 2030”.
Chapter - 4 Page 4 of 21
The structure of the proposed Technology Development Board is illustrated
in Fig 4.1
R&D institutions are an important part of the national innovation system of any
country. These institutions make a vital contribution to technological
transformation and enhance a country’s capacity to invent, absorb, adopt and
deploy technology through laboratory and pilot plant development work. An
interdisciplinary approach is invariably adopted and the work is carried out by
scientists, engineers, technologists, economists and technicians, who are suitably
trained and conversant with modern research and development methods and
equipment. In many cases these institutions also provide consultative services and
help to solve product and process problems of firms, such as the processes of
Chapter - 4 Page 5 of 21
decoding, trouble-shooting problems of transferred technology and improving
productivity and energy efficiency. The extent to which R&D effort are involved
in the productive sectors of an economy determines its contribution to
technological transformation and development. In addition, performance is judged
by the number of scientific publications in recognized international journals; the
number of product and process inventions, whether patented or not; and other
measures such as the utilization of their work for commercialization.
(iii) Development
R&D plays a decisive role for innovative solutions which are generated in
dialogue between users and developers. This dialogue is the central concern for
developing linkages between universities, industry and R&D institutions.
Unfortunately, these linkages are not well developed in Pakistan’s scientific
culture. Universities, R&D institutions and industry work in complete isolation
and there is little concern about a multi-disciplinary approach to research, as
practiced in NIC’s and scientific institutions in other countries. In addition, there
Chapter - 4 Page 6 of 21
is hardly any provision or facility for pilot plant work in Pakistan’s technological
institutions. Expenditure on R&D is limited and these institutions get little
funding from industry.
(iii) To create research teams drawn jointly from universities, industry and
R&D institutes for interdisciplinary technology development for the
identified projects.
(iv) To allocate resources for the execution of R&D and set targets for the
completion of work.
(vi) To determine the suitability of the projects for pilot plant study after
the completion of laboratory work.
(vii) To allocate resources for pilot plant study for the selected projects.
(viii) To continually appraise the results of pilot plant studies and determine
their techno-economic feasibility for commercialization, and
Chapter - 4 Page 7 of 21
To execute this programme for technology development, the role of the public
sector is absolutely essential and its responsibility should be clearly defined in
order to obtain tangible results. The structure of the National Committee for
Research and Technology Development is illustrated in Fig 4.2.
Chapter - 4 Page 8 of 21
Structure of National Committee For Research and Technology Development
`
National Committee for
Research and Technology
Development
Registration of Patents
Fig 4.2
Chapter - 4 Page 9 of 21
4.3 National Committee for the Development of Software and Hardware for the
Commercialization of Technologies
At present Pakistan has limited capacity for the development of the hardware and / or
software necessary for the technology transfer processes. The development of
industrial projects has been assigned in most cases to foreign engineering companies,
which are given the responsibility for the design, engineering and supply of critical
plants, and the construction of plants on an EPC basis (Engineering, procurement and
construction).
It is essential that Pakistan develop its own capability and technological infrastructure
for providing hardware and software services for the implementation and construction
Chapter - 4 Page 10 of 21
management of chemical projects. This can be accomplished by the formation of
engineering companies or by enhancing the capability of existing engineering
companies either as PPPs or as joint ventures with Chinese/Malaysian companies or
other foreign companies.
Chapter - 4 Page 11 of 21
(vi) Construction of Plants
The know-how and technology required for the development of projects will
be acquired from local resources or imported as process packages.
Chapter - 4 Page 12 of 21
(x) Reverse Technology Transfer
The foreign partner will locate some experts in Pakistan to work with the local
company to achieve the above mentioned objectives.
4.4 National Committee for the Development of Technology Policy and Investment
Planning
The role of the government may be reviewed from several perspectives: enhancing
the supply of science and technology; facilitating the transfer of foreign technology;
diffusing foreign technology; and promoting in-house research through local
Chapter - 4 Page 13 of 21
Proposal Structure of Engineering Companies for Commercialization of Technologies
Consultancy
Services
Chapter - 4 Page 14 of 21
Fig - 4.3
utilization of national R&D infrastructure; enhancing the scope of industrial
infrastructure for commercialization by advocating and developing PPPs, keeping
industrial peace; developing the scope and availability of various feedstocks;
protecting the environment; and setting quality standards for manufactured products
and systems. It is the integration of the various components of a NIS that determines
its effectiveness in accelerating technological transformation, knowledge acquisition,
generation, diffusion and application. The role of the government in the successful
utilization of various components of technology will depend on its ability to foster
PPPs with the involvement of industrial and venture capital institutions and a vibrant
entrepreneurial class in the implementation of its policies for development.
Chapter - 4 Page 15 of 21
It should also be recognized that an educational system which emphasizes practical
apprenticeship, and vocational and technological training, is far more relevant for
rapid technological development than the more academic and theoretical orientation
of other systems. The present trend in developed countries and NICs is to blend both
systems.
(iv) New methodologies introduced for the training of the labour force for the
operation and maintenance of plants utilized in the chemical industry.
Chapter - 4 Page 16 of 21
(v) Complete computerization of plant design and operation.
In view of these developments, the chemical industry faces enormous challenges. Six
major forces are shaping future developments in its business landscape. These are:
An integrated plan for education, research and project management for the
commercialization of chemical processes is illustrated in Fig 4.4 and 4.5.
Chapter - 4 Page 17 of 21
Development of Design and Engineering Infrastructure for Commercialization of Technologies
Project
&
Product Identification
Tech-Economic Study
And Project Approval Source of Finance
Debt/Equity Ratio
Fig-4.4
Chapter - 4 Page 18 of 21
An Integrated Plan For Education, Research
And Project Management For Commercialization
Of Chemical Industry
New Processes /
Technology
Industrial Survey Identification
And Management of R&D Projects
Pilot Plant Studies at Universities, R&D Institutes and
Industry
Licensing of Process Technologies
(Local / Imported).
SelectionCommercialization
and Adoption of of Processes
Technology for
Engineering, Project Management Services,
Commercialization.
Development of Project
Packages Creation &
Development
of Linkages
Process and Plant Management Consultancy Services
Plant Operation, Management and Revamping and Modernization,
Marketing Management Optimization and
Productivity Improvement
Fig – 4.5
Chapter - 4 Page 19 of 21
An important factor which is responsible for the development of the chemical
industry is the expansion of domestic demand for consumer products. Various NIC’s
and developed countries raised the income of low wage employees in the
manufacturing sector and exerted upward pressures on agricultural wages. The
minimum wage policy has been instrumental in increasing domestic purchasing
power at the grass root level, and consequently in accelerating the pace industrial
development.
The past experience of NICs has shown that industrial policies based on a strategy of
dynamic comparative advantage played an important role in sustaining and promoting
their economic development. These countries offered a variety of incentives to
accelerate the development of their industrial sector, such as tax exemptions, reduced
corporate tax, the provision of cheap credit and tax benefits. They introduced
outward-oriented trade and industrial policies, which boosted their exports of high
value-added goods, resulting in strong economic performance.
Chapter - 4 Page 20 of 21
Under the present political scenario it has become difficult to assemble capital
investment packages. Therefore, the private sector in Pakistan needs to have
increased access to external sources of funding, if it is to meet its investment needs.
In the absence of any state participation in private sector initiatives, the commercial
banking sector would be reluctant to participate in capital formation because of the
industrial risks involved. Therefore, state participation is imperative for promoting
economic development. In addition, other microeconomic and macroeconomic
policies need to be explored, in order to accelerate the pace of chemical industry
development.
Pakistan is beset with the “brain drain” of its highly qualified manpower, primarily
because of a lack of employment opportunities in the country. The development of a
NIS will require the services of tens of thousands of scientists, engineers,
technologists, economists and social scientists. Employment opportunities will arise if
a NIS is introduced, which should help to reverse this brain drain.
Chapter - 4 Page 21 of 21
CHAPTER – 5
STATUS OF EXISTING SECONDARY INDUSTRIES OF PAKISTAN
(SECTION 1)
CAUSTIC SODA
World Scenario
There are more than 500 Chlor-Alkali plants worldwide with manufacturing capacity
over 65 Million M Tons. During 2001-06 overall world capacity increased by 6 Million
M Tons with Northeast Asia increased by 7 Million Tons while rest of the world declined
by 1 Million M Tons. Up till 2011 it is expected that the world capacity will increased by
9 Million M Tons in which Northeast Asia’s contribution would be about 90%. This
Increment in capacity is solely due to the increased demand of chlorine in Northeast Asia
and not due to the increase in consumption of caustic soda.
65
70
60
50
Million Tons
40 28
30
20
3 0.435
10
0
World China India Pakistan
Chapter 5 Page 1 of 50
estimated to be 58.4 Million Tons in 2009 with an annual compound growth rate of
2.89%.
World Production
60
50
58.4
56.7
Million Tones
20
10
0
2002 2003 2004 2005 2006 2007 2008 2009
Year
Projections: Ever growing demand of PVC pushing caustic soda production and it is
estimated that it will grow with an ACGR of 2.8%.
World Projections
90
80
70
80.9
Million Tones
60 78.5
76.3
50 74
67.8 69.8 71.9
40 62 63.9 65.8
30
20
10
0
2011 2012 2013 2014 2015 2016 2017 2018 2019 2020
Year
Chapter 5 Page 2 of 50
World Trade:
Of the 56.7 Million M. Tons caustic soda produced in 2008, 28% i.e. about 16 Million
M.Tons was traded, of which 90% was from China, Europe, USA, and Japan. About 93%
of the trade was in liquid form i.e. 50% solid contents.
World Trade
16.6
16.4
16.2
16
16.4
Million Tones
15.8 16.3
15.6
15.4
15.2
15.6
15
14.8
15.2
14.6
2005 2006 Year 2007 2008
Prices
350
300 319
250
US $ / M.Tons
200 231
209
190
150
100
50
0
2005 2006 Year 2007 2008
Chapter 5 Page 3 of 50
Liquid Caustic Soda
Top 10 Exporters:
'Russian Federation
3%
'United States of
America
'Romania 14%
4%
'Belgium
5%
'China
'Netherlands 12%
5%
'Japan
'Chinese Taipei
10%
11%
Top 10 Importers:
'Brazil
12%
'United States of
America
'Sweden 6%
3%
'Finland
'Belgium 6%
3%
'Netherlands
'Austria 6%
'Jamaica 'Canada
4%
4% 4%
Chapter 5 Page 4 of 50
Solid Caustic Soda
Top 10 Exporters:
'Spain
3%
'India
4%
'Russian Federation
4%
'Thailand
'Chinese Taipei
4%
14%
'United States of 'Poland
America 7%
6%
Top 10 Importers:
'Viet Nam
Others 4%
61%
'Italy
4%
'Brazil
3%
'Uzbekistan
'Spain 3%
2% 'Namibia
2%
Chapter 5 Page 5 of 50
Sector wise Consumption:
Chemical sector is accounting for about 50% of caustic soda consumption with propylene
oxide 12%, Soap & detergents 5%, inorganic chemicals 5% and other organic chemicals
26%. Pulp & paper sector is consuming about 25% of the total caustic soda produced in
the world.
Petroleum
Alumina Water
3%
2% 2%
Pulp & paper
Propylene oxide 25%
12%
inorganics
5%
Other organic
26%
Others
20%
Chapter 5 Page 6 of 50
Pakistan scenario
Production Capacity
Presently, there are four plants with production capacity around 435,000 MTPY of
Caustic Soda. Engro Polymers has recently installed a new plant having name plat
capacity of 100,000 MTPY and Sitara Chemicals has enhanced its capacity from 129,000
MTPY to 180,000 in last year.
Nimir
Engro Chemicals,
Polymaers, 10,000, 2%
100,000, 23%
Sitara
Chemicals,
180,000, 42%
Ittehad
Chemicals,
145,000, 33%
Source: Manufacturers
Chapter 5 Page 7 of 50
Local Market Size of Caustic Soda
Local consumption of the caustic soda was increased with a compound annual growth
rate of 7% from 2000-01 to 2007-08 and then declined by 4.5% because of recession in
300
258.7
245.3 247.1
250 218 225.4
199 242.2 248.3 244.3
179.8 186
200
'000' M. Tons
50 28.7 21.7 26
4.2 11.5 11.3 3.5 10.6 3
0 0 0 0.1 0.1 0.1 0 0.4 0.2 0.2
2000-01 2001-02 2002-03 2003-04 2004-05 2005-06 2006-07 2007-08 2008-09
the world market and decline in exports of textile sector. Electricity is a major cost
component in the manufacturing of caustic soda, account for about 60% of overall cost of
production. Existing energy (Electricity & Natural gas) crises are badly impacted the
local production. Local
production, Carpet Industry,
4
consumption, imports Vegetable Ghee Others, 4
& Oil, 5
and exports of caustic
Textiles, 43
Oil & Gas, 6
soda of last nine years
Fertilizer, 6
are given below:
Source: Federal Pulp & Paper, 6
Bureau of Statistics
Pow er Plant, 7
Local Sector wise
Consumption Soap &
Detergents, 19
Alone textile sector of
Chapter 5 Page 8 of 50
Pakistan is 43% of caustic soda consumption. Second major consumption is in the
manufacturing of soap & detergent contributes about 19%.
Future Prospects
Local demand of caustic soda was declined by 4.5% in 2008-09 because of decline in
exports of textile sector, after recession in the international market. It is expected that in
future conditions will improved and demand will grow at a rate of 7% demand of caustic
soda is expected to be expand to 350,000 MTPY in the next 5 years. After Engro’s new
investment Country have sufficient capacity to cater the local market and export surplus.
0.4
0.35
0.3
0.25
0.2
0.15
0.1
0.05
0
2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019
Capacity 0.335 0.335 0.435 0.435 0.435 0.435 0.435 0.435 0.435 0.435 0.435 0.435 0.435
Demand 0.252 0.264 0.278 0.292 0.306 0.322 0.338 0.355 0.372 0.391 0.411 0.431 0.453
Capacity Demand
Chapter 5 Page 9 of 50
SWOT Analysis
Strengths
1. Abundantly available raw materials in the country at low rates
Weaknesses
1. The Caustic Soda manufacturing produces chlorine as a by-product which has
limited usage in the country only Engro Polymers utilizing chlorine for the
manufacture of value added products i.e. PVC. While in the rest of the world
chlorine is the main driver for the plant and caustic soda is considered as a by-
product.
2. High cost of energy
3. Availability of natural gas and electricity
4. High freight cost to export surplus capacity
Threats
1. Dumping of Caustic Soda in the country
Opportunities
1. Surplus capacity of caustic soda available to export
Chapter 5 Page 10 of 50
TARIFF STRUCTURE OF CHLOR-ALKALI INDUSTRY
Sodium Locally
Chloride Imported
Manufactured
2501.0020
20%
Electrolysis
Water Hydrochloric
Acid
Chlorine Absorption
2806.1000
10%
Lime Stone
2521.000 Calcium
10% Chloride
Hydrochloric Acid Acid Treatment
2827.2000
5%
Sodium
Hypochlorite
Chlorine Reaction
2828.9000
5%
Bleaching
Powder
Lime Stone Chlorine Reaction
2828.1010
2521.000
5%
10%
Ammonium
Chloride
Ammonia Hydrochloric Acid Reaction 2827.1000
2814.1000 5% (0%, SRO
5% 565)
Magnesium
Chloride
Magnesite Hydrochloric Acid Reaction
2827.3100
2519.1000
5%
5%
Ferric Chloride
Iron Waste Hydrochloric Acid Reaction 2827.3900
7204.0000 5%
0%
Nickel Chloride
Nickel Waste 2827.3500
Hydrochloric Acid Reaction
7503.0000 5% (0%, SRO
5% 565)
Chapter 5 Page 11 of 50
(SECTION 2)
Soda Ash, commonly known as dhobi soda or washing soda is used in the manufacture of
glass, soaps, detergents, sodium silicate, paper, caustic soda, paint, petroleum refining,
inorganic chemicals.
Global Scenario:
Capacity & Production: Worldwide soda ash is manufactured synthetically and is also
available as a mineral (Trona) in some countries e.g. USA, Kenya etc. World production
capacity is about 58.7 Million M.Tons while production is about 44 Million m.Tons.
Leading producers of soda ash are China, USA, India etc.
China
44% USA
23%
Middle East
4%
Africa
India
2%
6%
South East Eastern S. America
Asia Europe Western 0.47%
1% 7% Europe
13%
Chapter 5 Page 12 of 50
Global Production Breakup of Soda Ash
China
48%
Middle East
3% USA
23%
Africa
2% India
South East 5%
Asia S. America
1% 0.18%
Eastern Western
Europe Europe
6% 12%
Africa India
2% 7%
Chapter 5 Page 13 of 50
Top 10 Exporters:
Top 10 Importers:
Chapter 5 Page 14 of 50
Consumption Pattern
Globally, glass industry accounts for around 53% the total consumption of soda ash (see
table) followed by detergents & soap 13%, chemicals 11%, metal & mining 5% and
paper 1%.
Pakistan Scenario
Production Capacity
There are two Soda ash plants with production capacity of 470,000 MTPY. Both the
plants producing soda ash are located in the Salt Range area.
Source: Manufacturers
The Akzonobel
(former ICI) plant is
the oldest and largest
operating plant in
Pakistan. It was
established in 1944
Chapter 5 Page 15 of 50
with a capacity of 18,000 MTPY. The capacity has been progressively increased to
350,000 MTPY in 2009.
The Olympia Chemicals started operation in 2000 with a capacity of 40,000 MTPY
which has been increased now to 120,000 MTPY.
Chapter 5 Page 16 of 50
Consumption Pattern
Locally, glass & silicate industry accounts for around 43% of the total consumption of
soda ash (see table) followed by Bazzar (Detergent & textiles) 28%, detergents & soap
7%, chemicals 2, baking powder 9% and paper 11%.
Future Prospects
As mentioned earlier Pakistan’s existing production capacity of soda ash is about 470,000
MTPY while local market demand is about 364,000 and therefore has enough surplus
capacity about 106,000 M.Tons to export in regional and international market.
Chapter 5 Page 17 of 50
Local Market Size:
Sodium Bicarbonate is used in drugs manufacturing, bakery & food products and
beverages. Besides local production imports were also made in the recent years but are on
the decrease. Collective share of local manufacturers in the local market was about 79%
and share of import was 21%.
Future Prospects
Local manufacturers has sufficient capacity to cater all the local demand of sodium The
imports can be substituted through revival of Sindh Alkalis Plant or setting up of an
additional plant of same capacity.
Chapter 5 Page 18 of 50
TARIFF STRUCTURE OF SODA ASH INDUSTRY
Locally
Imported
Manufactured
Reaction
Sodium
Bicarbonate
Soda Ash
(Food Grade)
2836.2000
2836.3000
10%
20%(10%, SRO
567)
Chapter 5 Page 19 of 50
SECTION -3)
PETROCHEMICALS
Petrochemical products are broadly classified into two group i.e. basic and end-products.
The basic product group includes ethylene, propylene, butadiene and aromatics, while
the end-products include plastics, synthetic fibres and elastomers. The petrochemical
products offer to a large extent an ideal substitute for conventional materials such as
wood, metals, jute, natural rubber, etc. in which Pakistan is deficient. Therefore, there is
substantial scope for development of petrochemical industry in Pakistan.
During last three decades repeated efforts have been made to develop a project capable of
producing basic petrochemicals. In this connection numerous studies have been carried
out for production of basic petrochemicals i.e. ethylene, propylene, etc. utilizing the
alternate feed stocks i.e. naphtha, associated gases (ethane, propane), natural gas and
molasses (a by product of sugar industry). However, despite interest and efforts no
Chapter 5 Page 20 of 50
significant development has taken place as far as production of basic petrochemicals are
concerned.
Petrochemicals provide raw materials for plastics, detergents, dyes, paints & varnishes
and pesticides etc. They are also used as additives in the lubricating oils. Most of the
specialty and fine chemicals belong to the petrochemical group. Their production and
marketing is monopolized by few global giants.
Historically, polyvinyl chloride and polyethylene are the only thermo plastic materials
which have been produced in the country. These plants were setup in 1960s. The
polyethylene plant was closed down in 1970s.
Apart from PVC, polystyrene is also being produced by Pak Petrochemical Industries
(Private) Limited. The polystyrene plant uses imported styrene and is capable of
producing around 40,000 metric tons of various grades of polystyrene.
Consumption
Among the plastic materials the thermoplastics consumption of the country has reached a
sizeable level. Thermoplastics are the family of plastics formed by addition of
Chapter 5 Page 21 of 50
polymerization which can be reshaped by application of heat. The description and major
end-uses of major thermo plastics being consumed in Pakistan are given below:
Chapter 5 Page 22 of 50
Thermoplastic Consumption Trend
300
250
200
'000' M. Tons
150
100
50
0
2000- 2001- 2002- 2003- 2004- 2005- 2006- 2007- 2008-
01 02 03 04 05 06 07 08 09
Polyethylene (P.E) 155 157 192 220 232 275 274 267 198.6
Polypropylene (P.P) 110 144 142 165 188 225 219 210 156.2
Polyvinyl Chloride 84 87 92 88 91 97 132 23.6 23.56
(P.V.C)
Polystyrene (P.S) 11 9 14 15 15 16 16 118.4 121.9
Polyvinyl Chloride
24% Polyethylene
40%
Polystyrene
5%
Polypropylene
31%
Polyethylene (PE)
Chapter 5 Page 23 of 50
Polyethylene is a semi crystalline lightweight thermoplastic manufactured by the
polymerization of ethylene. It is used for packaging, household articles, Auto Parts,
bottles, containers and pipes. It is the leading commodity polymer among others being
consumed worldwide and also in Pakistan. There are two grades of PE:
Imports of Polyethylene
300
250
200
100
50
0
1999- 2000- 2001- 2002- 2003- 2004- 2005- 2006- 2007- 2008-
00 01 02 03 04 05 06 07 08 09
Polyethylene (P.E) 123 155 157 192 220 232 275 274 267 199
There is a fast growth in consumption of PE due to economic growth in the country and
substitution of PE for costly materials like metals, wood and others. Demand of PE grew
Chapter 5 Page 24 of 50
about 9% annually from 2002-03 to 2006-07 and after that it declined to about 198,640
M.Tons due to sharp rise in international prices.
The price trend of polyethylene is shown in the graph given below. During last six years
the prices has been increased by 123% due to the hike in the crude oil prices.
160
140
120
100
Rs./ Kg 80
60
40
20
0
2001- 2002- 2003- 2004- 2005- 2006- 2007- 2008-
02 03 04 05 06 07 08 09
50
40
30
Kg Per Capita
20
10
0
N. W. Africa/ Indone Malay Pakist
Japan China India World
Ameri Europ M. sia sia an
Chapter 5 Page 25 of 50
Transpolymer Pvt. Limited a foreign investor is interested in investing for the
development of local facility for Polyethylene and Polypropylene. The project is at its
initial stages.
Breakup of imports of different grades of Polyethylene i.e. HDPE and LDPE are given
below:
160
140
120
100
'000' M. Tons 80
60
40
20
0
1999- 2000- 2001- 2002- 2003- 2004- 2005- 2006- 2007- 2008-
00 01 02 03 04 05 06 07 08 09
High Density P.E 67 90 80 106 120 126 147 153 159 101
Low Density P.E 56 65 76 86 99 105 128 121 108 98
This graph shows that decline in import of PE after the year 2006-07 which was solely
due to hike in the prices of crude oil in international market.
Polypropylene (PP)
PP is the second largest thermoplastics being consumed in the country. Its primary use is
in Woven bags/cloth, household articles, furniture, industrial items and packaging like
Chemicals, Fertilizers and Textile Industries.
PP consumption was 65,169 M. Tons in 1996-97 which has been increased to 218,799 M.
Tons with an annual growth rate of 15% in 2006-07 afterward it declines mainly due to
sharp rise in prices of petroleum. The consumption of polypropylene during last ten years
Chapter 5 Page 26 of 50
is given in the graph shown
Imports of Polypropylene
250
200
150
'000' M. Tons
100
50
0
1999- 2000- 2001- 2002- 2003- 2004- 2005- 2006- 2007- 2008-
00 01 02 03 04 05 06 07 08 09
Polypropylene (P.P) 102 110 144 142 165 188 225 219 210 156
:
The price trend of imported polypropylene is given in the below.
140
120
100
80
Rs./ Kg
60
40
20
0
2001- 2002- 2003- 2004- 2005- 2006- 2007- 2008-
02 03 04 05 06 07 08 09
Polypropylene (P.P) 33 37 42 60 64 78 94.5 137.3
Chapter 5 Page 27 of 50
Per capita consumption of polypropylene in the world was 4 kg in 1997 and increased to
25
20
10
0
Am eri W. Indon Malay Thaila Pakist
Japan China India World
ca Europ esia sia nd an
5.5 kg in 2003. Per capita consumption was 22 to 28kg in the developed countries while
it was 1.14 to 13.2 in the developing countries and shows potential for polypropylene in
the region.
PVC is a colorless rigid material with limited heat stability with a tendency to adhere to
metallic surface when heated. Its major use is in the manufacturing of pipes, fittings,
artificial leather, wire & cables, footwear, PVC sheets etc.
World Scenario
World PVC production capacity stood 47.28 Million Tons in 2010 with an annual growth
rate of over 6%. During 2005-10 world capacity enhanced by 10.5 million tons of which
81% capacity expanded in Asia and Chinese share was 73% accounting 4.1 million tons.
At the moment China has the largest PVC capacity of the World after surpassing USA in
2006 and enjoying about 27% share of the world PVC capacity.
Chapter 5 Page 28 of 50
World Capacities by Region
35
30 34
25
Million M. 20
20
Tons 15
10 13
9
5 7.5 8 8
6.7 1 6.9 1.1 2
2.6 2.7 3
0
2001 2005 2010
Asian PVC capacity is growing at a fast rate of over 14% per annum because of the fast
economic growth in the region. It is estimated that the world PVC capacity will reach
about 53.55 Million Tons in 2014 which was about 37 Million Tons in 2005. About 89%
of this additional capacity will be installed in Asia. The graph representing the
distribution future expansions in PVC capacities is given below:
Chapter 5 Page 29 of 50
World PVC Capacity Expansion
(2005-10)
Europe China
91%
4%
Middle East
3% Asia
Other 89%
6% Other Asia
India
4%
6%
In 2009 about 31.35 million tons of PVC was produced and the capacity utilization was
about 71%. World production of PVC by regions is given
below.
30.0 4.2
4.1
3.9 4.0
25.0 3.9 3.9
6.1 6.2
6.1 6.0
20.0 5.6 6.0
Million M. Tons 7.8
7.6
15.0 7.2
7.0 6.9 7.2
10.0
12.2 12.9
5.0 9.3 9.4 9.9 10.8
0.0
2000 2001 2002 2003 2004 2005
Chapter 5 Page 30 of 50
at second and third position respectively. Share of Asia in world production was about
35%.
Price trend of last 7 years of PVC in Asia is depicted in the graph which shows a cyclical
trend like other plastics.
Production cost of PVC was lowest 200 $/M. ton in Middle East because of availability
of cheaper raw material and highest in America i.e. 305 $/m. ton during 2005.
Comparison of production cost in different countries is depicted below.
Chapter 5 Page 31 of 50
Production Cost of PVC (2005)
350
300
250
US $ per M. 200
Tons 150
100
50
0
Middle W.
Brazil China Japan USA
East Europe
Production Cost 200 240 270 280 290 305
The average on stream PVC plant sizes is given in the graph below:
350
300
250
200
'000' M. Tons
150
100
50
0
N. W. Middle Latin E.
World Asia Africa
Americ Europe East Americ Europe
Plant Size 347 200 160 159 149 118 117 101
World average size of PVC plant was 149,000 m. tons in 2005. North America with
347,000 tons had the greatest average PVC plant size followed by Western Europe,
Middle East, Latin America, Asia and Africa.
Chapter 5 Page 32 of 50
Average PVC Plant Size in Asia
350
300
250
200
'000' M. Tons
150
100
50
0
Asia Exc. South
Asia China Japan Pakistan India Taiwan
China Korea
Plant Size 117 97 160 135 100 118 285 327
In Asia South Korea has the largest average PVC plant size while smallest average size is
in China because in china about 60% capacity is based on acetylene route.
Pakistan Scenario
Engro Asahi Polymers (EAPCL) the only facility available in Pakistan for PVC
manufacturing was commissioned in 1999 at Port Qasim, Karachi. The plant capacity
was enhanced to 150,000 metric tons in 2009 for the manufacture of various grades of
PVC. They had also installed the facilities of Vinyl Chloride Monomer (VCM) / Ethylene
dichloride (EDC) through backward integration based on ethylene as a feedstock.
PVC consumption has also increased at a reasonably high growth rate i.e. 8 % per annum
much lower than the regional growth rate of 14%. During last 9 years, the total PVC
consumption has been increased from 84,380 M. Tons, in 2000-01 to 121,900 M. Tons in
2008-09. And per capita consumption of PVC has reached 0.73 kg in 2008-09 from 0.61
kg in 2000-01.
Local production, import, export and local market size of PVC is given in the graph
shown below.
Chapter 5 Page 33 of 50
Local Market Size of PVC
140
120
'000' M. Tons
100
80
60
40
20
0
2000- 2001- 2002- 2003- 2004- 2005- 2006- 2007- 2008-
01 02 03 04 05 06 07 08 09
Import 19.3 18.7 20.3 19.7 18.1 27.3 37.2 18.7 9.8
Export 0 0 11.5 22.2 13.9 20 0.2 1.4 6.6
Production 65.1 68.6 83.6 90.3 87 90 95 101.1 118.7
Local Market Size 84.4 87.3 92.4 87.8 91.3 97.3 131.9 118.4 121.9
Shoes Others
4% 3%
Compounding
8%
Pipes & Fittings
Garden Hose 58%
8%
Twist / Shrink /
Film
13%
Rigid sheet
5%
Artificial
Leather
1%
This project hopefully will come into production by the end of 2009.
Chapter 5 Page 34 of 50
Sitara Chemicals (Pvt) Limited major producer of caustic soda in Pakistan was also
planning for the installation of 45,000 TPA PVC plant based on calcium carbide route to
utilize in house chlorine.
After the completion of this project PVC’s capacity of Pakistan will be about 195,000
TPA and surplus PVC will be available for export purposes.
Sitara
23%
Engro
77%
Chapter 5 Page 35 of 50
PVC Industry Tariff Structure
PVC Artificial
PVC Pipes
3917.2390 (20%) Leather
5903.1000 (25%)
PVC
PVC Flooring
Compound 5904.1000 (25%)
3904.2200 (20%)
Chapter 5 Page 36 of 50
Polystyrene (PS)
PS is the most versatile product and is being consumed in variety of products ranging
from electrical/electronics accessories, parts of sanitary wares and for packaging
purposes.
There is only one company Pakpetro Chemicals in Pakistan manufacturing all grades of
polystyrene and not only meeting the local demand but also exporting. Production
capacity of all types of polystyrene (PS) is 39,000 M.Tons out of which 30,000 M.Tons is
of expansible polystyrene (EPS) and 9,000 M.Tons of both general purpose polystyrene
(GPPS) & high impact polystyrene (HIPS).
PS consumption on the average remains about 24,500 M.Tons during last six years. Local
market size, Production, import and export of polystyrene is given in above graph.
30,000
25,000
20,000
M. Tons 15,000
10,000
5,000
0
2003- 2004- 2005- 2006- 2007- 2008-
04 05 06 07 08 09
Production 25,931 25,787 27,627 25,036 25,950 24,701
Imports 7,329 5,503 5,628 5,073 4,844 3,515
Exports 6,261 10,102 8,011 7,178 7,149 4,658
Local Market 26,999 21,188 25,244 22,931 23,645 23,558
Size
Chapter 5 Page 37 of 50
(SECTION 1V)
Inorganic Acids
Sulfuric Acid
The largest single use, about 65% of the sulfuric acid produced annually, is in the
production of agricultural fertilizers, both phosphates and ammonium sulfate. Other uses
include production of:
Chapter 5 Page 38 of 50
Production Units & Capacity
Capacity
S.# Plant Name
MTPD MTPY
1 Acid Ind. Pvt. Ltd. Karachi 80 26,400
2 Amber Chemicals, Hattar 50 16,500
3 Ata Chemicals, Multan 100 33,000
4 Attock Chemicals, Hattar 80 26,400
5 Crescent Chemicals, Sukkur 40 13,200
6 Exide Pakistan limited, Karachi 70 23,100
Faras Combine Marketing Company (Pvt) Ltd. Bhai
7 Pheru 300 99,000
8 Fazal Chemicals, Lahore 100 33,000
9 Hazara Phosphate, Haripur 110 36,300
10 Ittehad Chemicals, Lahore 40 13,200
11 Karsaz Chemicals, Lahore 10 3,300
12 Al-Hamd Chemicals & Fertilizers, Jaranawala 100 33,000
13 Margala Industries, Hattar 20 6,600
14 PAEC, D. G. Khan 25 8,250
15 Pak Chemicals, Karachi 80 26,400
16 POF, Wah Cantt. 10 3,300
17 Prime Chemicals, Sheikhupura 30 9,900
18 Rawal Chemicals, Hattar 25 8,250
19 Rawal Chemicals, Sheikhupura 30 10,000
20 Raiwind Chemicals (Pvt.) Ltd., Karachi 100 33,000
21 Riaz Aslam Chemicals, Chunian 20 6,600
22 Shafiq Industrial Chemicals, Karachi 35 11,550
23 Tufail Chemicals, Lahore 50 16,500
Total: 1,505 496,750
Total sulfuric acid production capacity is 496,750 ton per year. Presently, the installed
capacity is surplus to the local demand.
Production from few sulfuric acid plants is reported to the Federal Bureau of Statistics.
Thus it does not represent the actual total production in the country. It is always very
Chapter 5 Page 39 of 50
important to know the actual production of sulfuric acid as it represents the health of the
industry in the country.
The reported production of sulfuric acid by FBS and estimated production and market
size is given below.
Production FBS 59,420 55,997 68,380 91,299 95,580 94,941 102,773 97,802
Production Estimated 59,379 63,104 109,206 157,189 172,440 190,427 212,472 234,567
Market
size FBS 59,426 55,679 67,963 90,931 94,804 94,048 102,713 94,298
Market
size Estimated 59,385 62,786 108,789 156,820 171,664 189,534 212,412 231,063
Chapter 5 Page 40 of 50
Hydrochloric Acid
It is used
In the manufacture of phosphoric acid, chlorine dioxide, ammonium chloride, fertilizers,
dyes, and artificial silk and pigments for paints.
As a refining ore in the production of tin and tantalum, as a lab reagent, and as a metal
treating agent.
To remove scale and dust from boilers and heat exchange equipment, to clean membranes
in desalination plants, to increase oil well output, to prepare synthetic rubber products by
treating isoprene, and to clean and prepare other metals for coatings.
In the neutralization of waste streams, the recovery of zinc from galvanized iron scrap.
In production of chemicals, i.e. production of vinyl chloride from acetylene and alkyl
chlorides from olefins, the manufacture of sodium glutamate and gelatin, the conversion
of cornstarch to syrup, sugar refining, electroplating, soap refining, leather tanning, and
the photographic, textile, brewing, and rubber industries.
As an antiseptic in toilet bowls against animal pathogenic bacteria, and in food
processing as a starch modifier.
Production Capacity
Ittehad Chemicals and Sitara Chemicals produce hydrochloric acid on demand from the
excess chlorine by-product available with them. The production capacities for both the plants
are sufficient to meet the local demand and the imports are generally negligible.
Chapter 5 Page 41 of 50
Nitric Acid
Nitric Acid is very important for certain types of reactions and uses especially in the
fertilizer and explosives industries. The principle use for nitric acid is the production of
fertilizers, explosives, flares, and rocket propellants. In making explosives, Nitric Acids
react with toluene in the presence of sulfuric acid to form trinitrotoluene (TNT).
The raw materials are ammonia, air and fresh water. There are three stages in the
production of nitric acid.
o Oxidation of ammonia,
o Oxidation of nitrogen monoxide
o Absorption of nitrogen dioxide in water.
Production Capacity
Nitric acid is produced by Pak-Arab Fertilizers, Multan for the production of Calcium
Ammonium Nitrate (CAN) fertilizers and POF wah for explosives such as Nitroglycerine
& Nitrotoluene production. The local demand is met through imports and surplus
production of above two units.
Total 465,600
Chapter 5 Page 42 of 50
(SECTION V)
Dyes & Pigments
Dyes are intensely colored substances used for the coloration of various substrates
including paper, leather, fur, hair, foods, drugs, cosmetics, waxes, greases, petroleum
products, plastics and textile materials. They are retained in these items by physical
adsorption, salt or metal complex formation, solutions mechanical retentions or by the
formation of covalent bonds.
Dyes are applied to textile fibers by two distinct processes, dyeing and printing, of which
dyeing is much more extensively used. Dyes are classified in accordance with their
chemical constitutions or their application method or coloring purposes.
Pigments, although both have the same purpose of imparting color to the article, are
differentiated from the dyes. Pigments are finely ground, insoluble particles that disperse
in the liquid portion of the paint. Dyes are generally “fast” which means they can
maintain their color throughout exposure to weathering effects like rain, wind & snow,
and normal wear & tear. Pigments are used to give desired color and gloss. Plus provide
“hiding ability” and surface protection. They are selected by characteristics such as
color, hardness, oil absorption, density, pH, refractive index, hiding efficiency and
opacity.
Titanium dioxide (Tio2) is the most commonly used pigment worldwide. It has a high
refractive index (second only to diamond) and when produced at the proper particle size,
allows for a large opacity. For the record, magnesium oxide, MgO, is whiter than TiO2,
but it does not have a high refractive index. This means that more MgO would be needed
to achieve the same opacity as TiO2.
Color pigments, on the other hand, have a large variety of ingredients. This is, of course,
due to the fact that there are so many different colors available that can give different
compositions of these, which can create the huge variety of colors possible.
Chapter 5 Page 43 of 50
Raw Materials
Raw materials for Dyes & Pigments are totally derived from petrochemical Building
Blocks. Manufacturing of dyestuff can be done either by processing dye intermediates or
by starting from basic chemicals (organic and inorganic chemicals). For instance
manufacture of technology intensive vat dyes involves lengthy and distinct stages, which
in many cases may run through ten or twelve intermediates. Therefore it follows that a
good base of raw materials is critical to the success of the dyestuff unit. Hence a dyestuff
manufacturing unit has to rely on a mix of local supplies as well as imports for its
requirement of raw materials.
World Scenario
Traditionally Dyes & Pigments manufacturing was concentrated in Europe because of
development and progress made by Germany in this field at the start of 20th century. This
high-Tech industry was limited to 7 or 8 major producers like BASF, Hoechst, Sandoz,
Bayer, ICI, Ciba-Geigy etc. up to the middle of 20th century. However in the later half of
20th century, major changes in the industry came up with the above multinational
companies, opening production sites out side Europe like in India, in Far-East, Japan,
USA etc.
This opened the secret technology to rest of the World and the decades of 70’s & 80’s
saw a mushroom growth in this industry, mainly in Far-East, India & China. The
environmental hazards involved in dyestuff manufacturing also pushes world wide
players to prefer import of dyes from developing countries. Another reason for this
change was the shifting of Textile Processing Industry from Europe & USA to Far East
and South East Asia.
Regional Scenario
Today China, India, Pakistan, Taiwan, Korea, Indonesia, Japan contributing about 70-
75% of world production of Dyes & Pigment. About 85-90% of raw materials, required
for Dyes & Pigments manufacturing, are produced by India & China.
A strong industrial base when formed for finished dyestuffs & pigments manufacturing
in China & India, brought a huge backward integration for manufacturing of basic raw
Chapter 5 Page 44 of 50
material called intermediates for this industry. Today India & China are top producers
and exporters of Dyes & Pigments intermediates.
India’s dye industry makes every type of dyes & Pigments. Production of dyestuff &
Pigment in India is around 75,000 tonnes. Traditionally the industry exports the 50% of
its production. The world market for dyes, intermediates and pigments is estimated to be
around US$ 23 billion and is growing at a rate of about 2%. The current share of India in
the global dyestuff market is around 2.5%. India is the second largest exporter of
dyestuffs and intermediates amongst developing countries after China.
Per capita consumption of dyestuffs in India, like most of the developing countries, is as
low as 50 grams against world average of 200 grams. Increasing middle class population
will stimulate demand for textiles, which in turn will accelerate the growth of dyes.
Pakistan Scenario
Pakistan although entered very late in this area and in early 60’s with manufacturing of
some Direct Dyes & Sulphur Dyes in the government owned corporation at Dawood
Khel. However this facility could not flourished due to unavoidable reasons. Clariant
Pakistan and Sandal Dyestuff are major manufacturers of dyes & pigments in Pakistan.
Chapter 5 Page 45 of 50
Production Capacity
There are 9 units in organized sector and multiple units at cottage level involved
in the production of dyestuff. The production capacity of main units is given below:
Pigment
Disperse
Powders Synthetic
Dyes & Acid Direct Reactive
Company Year & Prep. Organic Total
Prep. Dyes Dyes Dyes
based Products
thereof
thereof
HS Code 32041100 32041200 32041400 32041600 32041700 3204.2000
Chapter 5 Page 46 of 50
Capacity - 30.00 - 35.00 15.00 - 80.00
Chemical
Processin 2005~06 - 25.00 - 30.00 10.00 - 65.00
g
2006~07 - - - - - - -
Industries
(Pvt.) 2007~08 - - - - - - -
Limited.
2008~09 - - - - - - -
Capacity 5,000.00 5,000.00
M.N. 2005~06 989.30 989.30
Chemical
2006~07 1,150.00 1,150.00
Industries
(Pvt) Ltd. 2007~08 1,495.00 1,495.00
2008~09 1,764.00 1,764.00
Capacity 300.00 300.00
Shafi
Reso- 2007~08 38.00 38.00
Chem
2008~09 44.00 44.00
Capacity 1,300.00 2,830.00 1,810.00 7,885.00 14525 2,390.00 30,740.00
2005~06 369.40 980.95 298.35 4,013.40 4,177.33 1,371.10 11,210.53
TOTAL 2006~07 363.00 688.70 300.23 3,645.02 4,195.79 649.70 9,842.43
2007~08 383.00 552.50 268.47 3,305.90 4,948.35 586.00 10,044.22
2008~09 393.00 733.80 228.25 3,367.43 4,903.05 546.00 10,171.53
Source: Manufacturers
The local Dyes & Pigments manufacturing industry is producing almost all the basic
Dyes & Pigments ranges required for the export oriented textile units in Pakistan, who
are working for value addition and exports.
The dyes involve certain chemicals that are hazardous to the human skin. Some Azo
coloring agents have carcinogenic properties or may form amines (breakdown products),
which have carcinogenic and mutagenic properties. Approximately 70% of all dyes used
in the textile industry are Azo dyes. There are about 2000 different Azo dyes of which
Chapter 5 Page 47 of 50
approximately 200-300 may be hazardous. As a result worldwide players are downing
shutters and prefer imports of dyes from developing countries. This scenario is giving an
opportunity to the developing countries to establish a strong manufacturing base.
Future Prospects
There is local manufacturing of dyes and pigments but large quantities are still
being imported. Currently the total import of this group stood around Rs 5.0 billion.
Additionally, about Rs 0.4 billion worth of printing ink and paints were also imported.
Pakistan has a strong manufacturing base for Textile & Leather. The textile industry in
Pakistan is the single most important manufacturing sector, accounting for an average of
40% of manufacturing employment, 64% of exports and 30% of manufacturing value
added. Similarly Leather industry has also a strong base with the production of high value
added products such as leather garments, leather gloves, leather footwear & other leather
manufactures.
Chapter 5 Page 48 of 50
Paints and Varnishes
Paints and varnishes not only make our surroundings more attractive, they also protect
and preserve environmental resources. Our domestic and workspaces are certainly more
pleasant and more conducive to good work when the interior decor is attractive.
Production Capacity
There are around 22 units in organized and over 400 units in the unorganized sector,
manufacturing paints and varnishes. There are three major producers of paint in the
country and they together meet the 60% local requirement, remaining 35% demand is met
by the unorganized sector and 5% through imports. Major local paint manufacturers
include
ICI Pakistan.
Berger Paints.
Kansai Paints
Buxly Paints.
The paint units reporting their production to the Federal Bureau of Statistics increased
from 142 in 1997-98 to 306 in 2001-02, which represents about 75% of all units in the
country. The historical production data for few years is given below:
Paints &
M.T 3,899 5,406 15,023 17,148 23,935 26,308 29,830
Varnishes (s)
Chapter 5 Page 49 of 50
Six manufacturers of decorative paints are ICI Pakistan, Berger Paints, Buxly Paints,
Master Paints, and Brighto & Gobbis. The industrial paints segment has also a large
number of applications and uses. Major players in this segment are ICI Pakistan and
Berger Paints. Some industrial paints are imported.
The refinish segment caters the requirements for maintenance of vehicles. Major players
in this segment are ICI Pakistan, Berger Paints and Champion Paints.
The recent trend in the world is to apply powder coating instead of liquid paints and there
are a lot of chemicals required for preparation of metal sheet before powder coating.
These chemicals are basically known as pre-treatment or phosphating chemicals, which
include degreasing, phosphating Anodizing chemicals etc. There are a number of small
units producing above chemicals in Lahore and Karachi catering to the local
manufacturers of home appliance like Dawlance, Waves and Multinationals including
carmakers like Toyota, Honda, Suzuki, etc.
Oxyplast Karachi also has the facility to produce powder-coating paints. The raw
materials are Polyester resin, Epoxy resin, Barium Sulphate, Titanium Oxide and curing
agents.
FUTURE PROSPECTS:
The current production is sufficient for local demand. However, the raw material used in
this sector are being imported and comes from Petrochemical base, setting up of a
Petrochemical base would help backward integration in this sector resulting in industrial
growth.
Chapter 5 Page 50 of 50
CHAPTER – 6
PROPOSAL FOR THE FUTURE DEVELOPMENT OF SECONDARY
INDUSTRIES IN PAKISTAN
The principal purpose of the Secondary Industries is to provide the connecting link
between the products of the Primary Industries and materials which are of practical use to
Pakistan’s national economy. This implies that they will rely upon the Primary Industries
for Feedstocks and will consist of engineering, fabrication, construction and
manufacturing plants for petrochemicals, plastics, steel, aluminium, minerals, agricultural
and miscellaneous products. These industries will require medium and relatively high
technology and range from medium to light categories. However, the Secondary
Industries will not only be concerned with the manufacture of finished goods but will also
become the principal suppliers of raw materials, particularly plastics for the development
of downstream small and medium scale enterprisers.
The size of the secondary industries should be based on market analysis and projections
of demand for intermediate products and consumer goods, as well as the projected
availability and character of feedstocks from the Primary Industries and other sources.
Their selection should also be based on the opportunities for regional and world export
marketing of selected products.
The following criteria have been used for determining the suitability of secondary
industries:-
The secondary industries should where possible use feedstocks which will be
available from the primary industries to produce materials with high added
value.
Chapter – 6 Page1 of 5
ii) Use of other resources available in Pakistan
The secondary industries will use Pakistan’s natural resources and produce
materials related to demand by the various economic sectors within Pakistan
butt should also consider the potential for exports of the finished products.
Maximum use should be made of the availability of technical and managerial
skills, the abundance of energy supplies and the suitably developed
infrastructure.
The secondary industries should be sized and planned to take account of the
development of export markets in the Central Asian States, Afghanistan, Sri
Lanka and other adjoining countries in the Middle East.
The present development of small and medium secondary chemical industries in Pakistan
is based on the policy of import substitution and no consideration has been given to the
potential for exports of the manufactured products. In addition the manufactured goods in
many cases are not comparable in quality as well as costs with imported products.
The selection of candidate industries has been based on a review of the feedstocks
produced by the Primary Industries and other raw materials available in Pakistan coupled
Chapter – 6 Page2 of 5
with an assessment of the future needs of the industrial, agricultural, commercial and
domestic sectors of the economy.
The assessment of the potential markets in Pakistan is hampered by the relative scarcity
of market research data. The Import/Export Statistics cover materials handled through the
ports but it is generally supposed that much of the overland trade goes unrecorded.
ii) Pakistan will have to develop progressively its national innovation system
which will enable it to improve continually its technological and management
capabilities necessary for the improvement of quality as well as productivity
of the manufactured products
Chapter – 6 Page3 of 5
Suggestions for the Development of Secondary Chemical Projects Based on Locally
Available and Imported Materials.
For the future development of secondary chemical industries, it is proposed that various
industries are divided into different industrial sectors as shown below. A list of potential
industries has also been prepared as shown against each sector.
The consultant would like to propose that preparation of feasibility reports are initiated
for each of these industries by EDB.
Chapter – 6 Page4 of 5
for heating/electrification
Chapter – 6 Page5 of 5
Chapter 7 – Tariff
Background:
In order to develop the Chemical Industry, review of Customs Tariff structures for the Industrial
Tariff lines including Chemical and related industry of Pakistan and ensure its best fit in these
new tariff imperatives was initiated in 2000-2001. The exercise was primarily based to determine
the optimum tariff structures achievable for each segment of the Industry taking also into
consideration the need to remove anomalous relationships i.e., (cascading) upstream to
downstream, as far as practical. Since then fine tuning of the Tariff Structure continued during
the annual budget exercises in close consultations with the relevant stake holders.
Existing Status
As a result of rationalization of Tariffs, investments were made in the capital intensive industries
like PVC, Polystyrene, Hydrogen Peroxide and downstream industries of Pure Terephthalic Acid
(PTA).Pakistan has now become a major exporter of PET resins. Similarly the PVC industry has
not only invested in expansion but has gone for upstream integration through manufacture of
Ethyl Di-Chloride (EDC) and VCM. This ultimately would create demand for a Naphtha Cracker
which is considered to be the basic requirement for the growth of the Chemical industry.
Under the existing Tariff Structure for approximately 1325 Tariff lines spread over 13 chapters
of the Pakistan Customs Tariff relates Chemical sector which also includes fertilizers,
Pharmaceuticals and Pesticides. Chapter and duty wise break up is shown in Table below;
Summary - Chapter wise Customs Duty
No of
CD%
Chapter Tariff
2010-11
lines
0 3
5 166
28) Inorganic chemicals; organic or 10 32
inorganic compounds of precious
15 2
metals, of rare-earth metals, of
radioactive elements or of isotopes. 20 2
25 3
Rs.4000/MT 1
28 Total 209
0 6
5 442
10 32
29) Organic chemicals
15 5
20 14
25 13
29 Total 512
5 9
10 32
30) Pharmaceutical products
20 10
25 3
30 Total 54
0 23
31) Fertilizers
5 1
31 Total 24
0 6
32) Tanning or dyeing extracts; 5 16
tannins and their derivatives; dyes, 10 10
pigments and other colouring
matter; paints and varnishes; putty 15 19
and other mastics; inks 20 28
25 1
32 Total 80
33) Essential oils and resinoids; 10 16
perfumery, cosmetic or toilet
preparations 35 30
33 Total 46
34) Soap, organic surface-active 0 4
agents, washing preparations, 5 5
lubricating preparations, artificial
waxes, prepared waxes, polishing 10 8
or scouring preparations, candles 15 1
and similar articles, modelling 20 15
pastes, "dental waxes" and dental
preparations with a basis or plaster
25 6
35 4
34 Total 43
0 1
5 3
35) Albuminoidal substances;
10 11
modified starches; glues; enzymes
15 2
20 7
35 Total 24
36) Explosives; pyrotechnic 20 5
products; matches; pyrophoric
alloys; certain combustible 25 3
preparations
36 Total 8
5 33
10 1
37) Photographic or 15 1
cinematographic goods 20 1
Rs. 5 per meter plus 5% ad val. 2
37 Total 38
0 8
5 40
38) Miscellaneous chemical 10 28
products 15 13
20 23
25 5
38 Total 117
0 3
5 31
10 24
39) Plastics and articles thereof
15 7
20 80
25 25
39 Total 170
Grand Total 1325
Road Map
Analysis of this indicates that above 50% of the products are placed at 0 and 5% duty slabs.
These products are mostly not manufactured locally or are basic inputs for other industries.
Except for consumer products like Soap, Shampoos, Detergents, Cosmetics and Toiletries etc.
which are placed at 25 and 35% duty, all other products are inputs for other industries and attract
a duty ranging from 10 to 20%. Further rationalization of Tariff with a view to bring down duties
of products attracting duties of 20% and above to a maximum of 15% ensuring a spread of
minimum 10% between raw materials and finished products or value addition whichever is
higher is considered imperative, through a process of phased reduction in consultation with the
stake holders and spread over a period of 5 years. This reduction becomes all the more important
in view of NAMA and the Free / Preferential Trade Agreements being planned by the
Government. Products which are at 20% and above are listed below:
Products at 20%
PCT CD%
S.# DESCRIPTION
CODE 2010-11
1 2815.1100 - - Solid 20
40 3210.0090 - - - Other 20
41 3211.0090 - - - Other 20
42 3212.1000 -Stamping foils 20
43 3212.9020 - - - Pigments in paint or enamel media 20
44 3212.9090 - - - Other 20
45 3213.1000 -Colours in sets 20
46 3213.9000 -Other 20
47 3214.1010 - - - Glaziers putty (mastic based on oil) 20
48 3214.1020 - - - Grafting putty (mastic based on wax) 20
49 3214.1030 - - - Resin cements 20
50 3214.1090 - - - Other 20
51 3214.9090 - - - Other 20
52 3215.1190 - - - Other 20
53 3215.1990 - - - Other 20
54 3215.9090 - - - Other 20
55 3402.1190 - - - Other 20
56 3402.1220 - - - Other than in retail packing 20
57 3402.1290 - - - Other 20
58 3402.1300 - - Non-ionic 20
59 3403.1110 - - - Of a kind used in the leather or like industires 20
61 3403.1139 - - - -Other 20
62 3403.1190 - - - Other 20
63 3403.1910 - - - Greases 20
64 3403.1990 - - - Other 20
- - - Of a kind used in the leather or like industires including fat
65 3403.9110 20
liquors
67 3403.9139 - - - -Other 20
68 3403.9190 - - - Other 20
69 3403.9990 - - - Other 20
70 3505.1090 - - - Other 20
71 3505.2010 - - - Starch based glues 20
72 3505.2020 - - - Dextrin based glues 20
73 3505.2090 - - - Other 20
75 3506.9190 - - - Other 20
76 3506.9990 - - - Other 20
77 3601.0000 Propellent powders 20
81 3606.9000 -Other 20
82 3701.3090 - - - Other 20
83 3808.9990 - - -Other 20
84 3810.9000 -Other 20
85 3811.1100 - - Based on lead compounds 20
Products at 25%
PCT CD%
S.# DESCRIPTION
CODE 2009-10
1 3926.1000 -Office or school supplies 25
2 3925.9000 -Other 25
-Shutters, blinds (including Venetian blinds) and similar articles and
3 3925.3000 25
parts thereof
4 3925.2000 -Doors, windows and their frames and thresholds for doors 25
35 3604.9000 -Other 25
36 3604.1000 -Fireworks 25
37 3406.0000 Candles, tapers and the like. 25
38 3405.9000 -Other 25
-Polishes and similar preparations for coachwork, other than metal
39 3405.3000 25
polishes
40 3405.1010 - - - For footwear 25
41 3402.9000 -Other 25
42 3402.2000 -Preparations put up for retail sale 25
43 3209.1090 - - - Other 25
44 3005.9090 - - - Other 25
45 3005.1090 - - - Other 25
Products at 35%
PCT CD%
S.# DESCRIPTION
CODE 2009-10
-Organic surface-active products and preparations for washing the
1 3401.3000 skin, in the form of liquid or cream and put up for retail sale, 35
whether or not containing soap
2 3401.2000 -Soap in other forms 35
3 3401.1900 - - Other 35
4 3401.1100 - - For toilet use (including medicated products) 35
5 3307.9090 - - - Other 35
6 3307.9010 - - - Contact lens solution 35
7 3307.4900 - - Other 35
- - "Agarbatti" and other odoriferous perparations which operate by
8 3307.4100 35
burning
9 3307.3000 -Perfumed bath salts and other bath preparations 35
10 3307.2000 -Personal deodorants and antiperspirants 35
11 3307.1000 -Pre-shave, shaving or after-shave preparations 35
12 3306.9000 -Other 35
13 3306.2000 -Yarn used to clean between the teeth (dental floss) 35
14 3306.1090 - - - Other 35
15 3306.1010 - - - Tooth paste 35
16 3305.9090 - - - Other 35
17 3305.9020 - - - Dyes for hair 35
18 3305.9010 - - - Cream for hair 35
19 3305.3000 - Hair lacquers 35
20 3305.2000 -Preparations for permanent waving or straightening 35
21 3305.1000 -Shampoos 35
22 3304.9990 - - - Other 35
23 3304.9920 - - - Tonics and skin food 35
24 3304.9910 - - - Face and skin creams and lotions 35
25 3304.9190 - - - Other 35
26 3304.9120 - - - Talcum powder 35
27 3304.9110 - - - Face powder 35
28 3304.3090 - - - Other 35
29 3304.3010 - - - Nail polish 35
30 3304.2000 -Eye make-up preparations 35
31 3304.1000 -Lip make-up preparations 35
32 3303.0090 - - - Other 35
33 3303.0020 - - - Perfumes 35
34 3303.0010 - - - Eau-de-cologne 35
Tariff reduction modalities under NAMA
The text under negotiation stipulates Formula Coefficient and Flexibilities as under:
• For developed countries the proposed co-efficient is [5-7]. For developing countries
either of the following can be accepted
(x) 20 with flexibilities of 14%] with trade volume of 10%].
(y) 22 with flexibilities of 10% and trade volume 10%.
(z) 25 with no flexibilities.
A preliminary exercise, carried out to determine the impact, the following scenario emerges on a
bound rate of 75% which has been considered in this example as most of the Tariff lines have
this rate:
Under the Swiss formula for calculating reduction in bound rates, cut would be greater on higher rates as
elaborated in the Table above and products at duties upto 15% would be least affected therefore the
industry should prepare for reduction of tariff to 15% which otherwise is also considered as tariff peak.
CHAPTER - 8
CONCLUSIONS AND RECOMMENDATIONS
(i) The development of chemical industry produces high value-added goods and is
essential if Pakistan is to remain internationally competitive, reduce its trade
deficit and record strong rates of economic growth.
(ii) Feedstocks derived from primary industries, as well as alternative sources of raw
materials, which are required for the development of secondary chemical
industries have been investigated and processes for their utilization have been
outlined. These will form the basis for the future development of secondary
chemical industries in Pakistan. A number of potentially feasible projects in
various sectors of chemical industry have been proposed for future
implementation.
(iii) Pakistan’s major exports consist of low technology, labour intensive products.
The share of medium and high technology products in total exports from Pakistan
remains very small in spite of the trade liberalization policies that have been
adopted over the past 10 years.
(iv) The development of primary and secondary chemical industries has occurred
primarily with the help of foreign engineering corporations, which were awarded
turnkey contracts for the commercialization of local and / or imported
technologies on EPC (Engineering, Procurement and Construction) basis.
(v) The National Innovation System (NIS), consisting of process science and
engineering technology (PS&ET), necessary for the integration of facilities for
technology development, process design, detailed engineering, manufacturing of
`capital plant and machinery, plant construction, and marketing management is
very weak. It requires enhancement and modernization in order to enable the
development of local capabilities for the commercialization of local and / or
imported technologies.
Chapter – 8 Page 1 of 5
(vi) We recommend that the scope of the Engineering Development Board should be
enhanced and given the additional responsibility for technology development. In
order to achieve this objective, we propose that three committees should be
established under Engineering And Technology Development Board (ETDB) in
order to strengthen the NIS. These are:
The task of each of these Committees will be to foster links between universities,
research and development (R&D) institutions and industry necessary for the
development, appraisal and evaluation of local and / or imported technologies, to
create engineering companies as joint ventures between local and / or foreign
companies for the development of facilities required for the commercialization of
local and imported technologies and to develop industrial and investment policies
for capital formation on continual basis.
(viii) The chemical industry is the driving force in developing a healthy Pakistani
economy, so as to provide jobs and bridge the gap between imports and exports.
This poses an increasing challenge for the chemical industry over the next twenty
years as global competition, technology advances, public health and
environmental concerns, and new markets and products shape the future.
Chapter – 8 Page 2 of 5
The present policy for the development of chemical industry based entirely on
imported technologies and their commercialization by awarding Turnkey
contracts to Foreign Engineering Companies on EPC basis (Engineering,
Procurement and Construction) is costly and highly uneconomic. According to
World Bank estimates the investment costs of chemical projects in countries
where National Innovation System (N.I.S) is lacking or not well developed is
about 40 percent higher compared with their costs in countries where industrial
infrastructure is locally established.
(ix) The rapid development of South East Asian and ASEAN Countries as well as
China and India has been based on the development of their N.I.S. which forms
an important aspect of their economic policies and institutional framework. The
rapid development of their manufactured industrial products and spectacular rates
of growth in exports has been the result of the development of local technology,
engineering and industrial infrastructure. Pakistan will not be ale to compete with
these countries on quality as well as costs for the export of its manufactured
products unless it is able to enhance its capability with the development of N.I.S.
(x) In order to prepare an Action Plan for the development of N.I.S. and Institutional
infrastructure, it is suggested that ETDB establish a Commission with its
members drawn from:-
Chapter – 8 Page 3 of 5
The development of Action / Implementation Plan will become the basis for the
preparation of PC-1 for the allocation of Resources. In addition we would like to
propose that ETDB organize a National Conference with the participation of
various public/private sector organizations which will also be useful for the
preparation and development of comprehensive policy for the development of
National Innovation System.
(xi) The main factors affecting continual brain drain of Pakistan’s highly qualified
manpower is due to lack of employment opportunities. The development of NIS
will require the services of tens of thousands of scientists, engineers,
technologists, economists and social scientists, and will therefore result in job
creation which will reverse the current brain drain.
(xii) Pakistan has been importing Second Hand Plants based on Antiquated
Technology, Energy Intensive, Low Productivity Projects. The products
manufactured by these plants in many cases are not economically competitive
with the imported products. Such plants in many cases were ultimately shutdown.
In addition the investors in some cases were not able to pay the Bank Loans
which had to be written off.
(xii) Pakistan is dependent upon foreign engineering and construction companies for
the acquisition and commercialization of technologies for the development of its
primary and secondary industries. Under the circumstances it is not possible for
its industrial products to compete in the international markets in respect of quality
and costs unless it is able to achieve self reliance by developing its local
technological and social capabilities as a part of its NIS.
Chapter – 8 Page 4 of 5
The national innovation system consists of a set of institutions whose interaction
determines the innovative performances of the economy. These consist of private
and public R&D institutions, operations, design, engineering and construction
management corporations, capital plant manufacturing companies, financial
institutions, the educational system and government regulatory bodies. These
constitute the framework for the creation of pro-innovative environment aimed at
maintaining quality, productivity of manufactured goods and products and
increasing the competitiveness of a country in the international markets.
Chapter – 8 Page 5 of 5
Annexure - B
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