In 1947 Pakistan inherited very small industrial infrastructure. In 1947 only some 5 percent of the large-scale industrial facilities in British India were located in what became Pakistan. The country started with virtually no industrial base and no institutional, financial, or energy resources.It was insufficient to meet the needs of the day-to-day life. Initially sugar mills, biscuit factories, cigarettes factories, oil mill, cement units, match factory, steel rolling, and glass work factories were set up. Three small hydroelectric power stations provided limited electricity to a few urban areas. Firewood and dung were the main sources of energy; commercial energy sources supplied only about 30 percent of the energy consumed. Further, there was a shortage of management personnel and skilled labor.
The pace of industrialization since independence has been rapid, although it has fluctuated in response to changes in government policy and to world economic conditions. During the 1950s, manufacturing expanded at about 16 percent annually; during the first half of the 1960s, it expanded at around 11 percent a year. The pace slowed to under 7 percent a year in the second half of the 1960s. Between FY 1970 and FY 1977, the index of manufacturing output increased an average of only 2.3 percent a year. Between FY 1977 and FY 1982, the index rose an average of 9.9 percent a year. Growth averaged 7.7 percent during the Sixth Five-Year Plan (1983-88) and 5.4 percent from FY 1989 through FY 1992. In FY 1993, manufacturing accounted for 17.3 percent of GDP at current factor cost, of which large-scale manufacturing accounted for 61 percent and small-scale manufacturing for 39 percent. Manufactured goods accounted for 64 percent of all exports by value in FY 1993, but the bulk of these exports came in the relatively low-technology areas of cotton textiles and garments.
The new democratic government of PPP after assuming power adopted the policy of nationalisation. Ten basic industries were nationalised. Later some others were also taken over to havea greater state role. Initial euphoria ended and industrial output suffered. It also caused flight of capital from the country. The policy of the governments in 1990s changed. Since 1990s all the governments including that of PPP followed the policy of denationalisation and privatisation. They are promoting Free Economy, Foreign investment, non-governmental initiatives, Foreign DirectInvestment and investment from Pakistanis settled outside the country.
Textiles is a major industry based on agriculture. Pakistan’s economy is heavily dependent on the cotton and textile sectors – which account for 8.2 percent of the value-added in agriculture and about 2 percent of GDP. Cotton accounts for about 10 percent of Pakistan’s agriculture GDP, and textiles account for about 55 percent of Pakistan’s foreign exchange earnings. Cotton production supports Pakistan’s largest industrial sector, comprised of over 400 textile mills, 1,000 ginneries and 300 oil expellers, thus providing an economic livelihood for millions of farmers and those employed along the entire cotton value chain. Huge textile industry caters to domestic and external market. Major centers are Faisalabad, Multan, Lahore and Karachi. Woollen Cloth is manufactured in Karachi, Lawrencepur, Harnai, Quaidabad, Multan and Bannu.
When global textile and apparel quotas were eliminated in 2005, supply chains realigned to reflect the importance of competitiveness factors, such as the cost of materials, labor, electricity and rent. Competitiveness is also influenced by off-balance-sheet transaction costs, such as worker skills, infrastructure, productivity, the costs of doing business and corruption. Pakistan’s apparel exports to the United States recorded net growth of 18 percent during the post-quota market liberalization period, but declined by 0.22 percent in 2008. 2 For context, total United States apparel imports declined by 3.3 percent in 2008. Meanwhile, exports from Cambodia and India have declined and exports from Bangladesh, where labor and electricity costs are lowest, have been increasing. Despite Pakistan’s clear cost advantage, its knitted apparel exports declined by 1.8 percent in 2007–2008, while Bangladesh’s surged 15 percent.
Pakistan has made tremendous progress in the Sugar industry. It is a food item; Agro based industry, located in Sindh, Punjab and Sindh. The Cement industry has gone through major expansion. Over 20 factors are established in the pubic and private sector, caters to Pakistani needs. Still it is imported in limited quantity. Most of the sites are in Dandot, Daud Khel, Wah, Rori and Karachi. Vegetable Ghee [cooking oil] is a major food item. There is much expansion over the years both in private and public sectors. Now Pakistan is self sufficient, although some raw material for making cooking oil is imported. About 60 units are in Sindh, Punjab and NWFP.
A Steel Mill near Karachi was set up with the help of the former Soviet Union. The major problem was thatof raw material. The iron ore found in Pakistan is very poor in quality. Steel rolling units and iron related factories exist in different parts of Pakistan. Major paper industry was in East Pakistan, which was lost in 1971. Pakistan had to face shortage of locally made paper after 1971. Now this industry is located in Noshera, Charsada, Gujranwala, Lahore, and Gharo. Some quality paper has to be imported.
Heavy Mechanical Complex (HMC) Texla serve the Machine tools sector. HMC set up with Chinese cooperation. Machinery, industrial equipment, engineering goods, engines, machinery for sugar, cement, sugar, and fertilizer industry is prepared here. Wah Ordnance Complex is established for Weapons and armaments. HMC is making Tank Rebuild Factory. Kamara Aircraft Rebuild factory overhaul F-6 and Mirage. It is also manufacturing Maashak, K-8.
Other important industrises are Fertilizer, Tobacco and cigarettes, Oil Refineries, Car and Tractors production, Shipbuilding: Karachi Shipyard, Ship breaking. Industries established on small scale, involving a householdor small number of people, use of limited resources, having lessinvestment are called small or cottage industries e. g., Carpets, sports goods, toys, power or handlooms, handicraft etc.
Since the mid-1960s, the industrial sector has produced 19 to 25 percent of gross domestic product (GDP), accounting for 24.5 percent of GDP in 2004. Manufacturing and construction dominate the industrial sector, accounting for around 19 percent of GDP. Since the 1980s, approximately 17 to 20 percent of the working population has been employed in the industrial sector (25 percent in 2004), mostly in manufacturing and construction. Although the industrial base has diversified since independence, the production base depends heavily on textiles and sugar. Manufacturing output is therefore vulnerable to adverse weather conditions and fluctuations in international prices for cotton and sugar. Various liberalization reforms have been pursued since the early 1980s but have been hindered by substantial corruption, frequent raw material shortages, the government’s tendency to provide generous concessions to particular sectors (such as sugar refining and yarn spinning), and a burdensome tax structure that has helped promote the development of the informal economy.
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