By Hamid Mahmood ISLAMABAD, November 03 (INP-WealthPK): Following the Pakistani government expectations for a robust start to the new fiscal year, the Large-Scale Manufacturing (LSM) sector grew 2.09 percent on a month-on-month (MOM) basis, and 12.74 percent on a year-on-year (YOY) basis in July-August 2021-22, outperforming the previous year in almost all categories. Photo: Adobe Stock The LSM sector continued to develop steadily in August, thanks to the relaxation of pandemic restrictions, which boosted demand and output both at home and abroad. Textile, food, beverages and tobacco, pharmaceuticals, non-metallic mineral products, automobiles, iron and steel products, and paper and paperboard production increased in July-August 2021-22 compared to July-August 2020-21, while fertilizers, electronics, rubber products, and wood products’ production decreased. Higher export orders received mostly by the country's textile producers aided the excellent development in industrial production. Furthermore, the expansion aided businesses in rehiring employees who had been laid off as a result of the countrywide lockdown enforced in March 2020 to deal with the first wave of the Covid-19 pandemic. Increased industrial production also aided the respective authorities in collecting more tax revenue. On a MOM basis, the Oil Companies Advisory Council Index (OCAC) climbed by 3.18 percent and the Ministry of Industry (MoI) Index increased by 4.06 percent in the first two months of FY2021-22. During the month, however, the Provincial Bureau of Statistics (BoS) index fell by 2.13 percent MOM. The LSM industries index, on the other hand, rose 7.26 percent YOY. A YOY increase of 2.35 percent was noted in OCAC, 6.72 percent in MoI, and 9.43 percent YoY growth in provincial BoS, respectively. The latest optimistic LSMI (Large-Scale Manufacturing Industries) results on a MOM basis suggest that the country's economic activity remains strong. The output of LSMI for the first two months of the fiscal year 2021-22 has seen an upward trend as reflected in the figures below.   Source: PBS, INP-WealthPK Research A robust manufacturing sector boosts domestic production, exports, and employment, all of which contribute to an economy's overall growth. The manufacturing industry in Pakistan provides 12.79 percent of GDP and employs 16.1 percent of the country's workforce. Chinese contribution to the LSM sector in Pakistan China-Pakistan Economic Corridor (CPEC) project alone has attracted USD 60 billion in Chinese investment. CPEC is an important part of China's Belt and Road Initiative (BRI). In FY21, China's net Foreign Direct Investment (FDI) inflow remained at USD 402.8 million, the largest in the list of inflows from other nations. Chinese investors have also expressed interest in purchasing a number of Pakistan's deficit state-owned enterprises (SOEs), which the government has chosen to privatise. China is one of the few bidders interested in taking over Pakistan's faltering SOEs, such as railways, Pakistan International Airlines (PIA), and Pakistan Steel Mills (PSM), according to Dr. Ishrat Husain, former adviser for institutional reforms and austerity. Chinese trade and industrial concerns are working in textile, cement, power, steel mills, housing projects, and telecommunications industry, according to the Pakistan-China Joint Chamber of Commerce and Industry (PCJCCI). The trust of Chinese investors is growing, with China accounting for the majority of the 117 foreign businesses registered with the Securities and Exchange Commission of Pakistan (SECP) in 2020. Islamabad had the most firms registered (628), followed by Lahore (625) and Karachi (349). In November 2020, the SECP registered 1,956 new firms, an increase of 41 percent over the same time last year. Covid-19 has emerged as one of the most serious threats to the world and domestic economies, halting economic activity. The situation was more difficult for Pakistan's industrial sector for two reasons: For starters, many manufacturing operations must be performed on-site and cannot be done remotely. Second, due to strong trade and production links with the most impacted nations, industrial activity has slowed down. However, the government foresaw the problem and took necessary steps, including early business resumption, smart lockdown, assistance for export-oriented companies, and construction and industrial packages. Now that the LSM sector is back on track, it has performed well in the first two months of FY2021-22. This will have a good impact on FDI, employment, and economic growth.