Presentation made for my API class at uni.

1. KEY ISSUES IN INDUSTRY IN
PAKISTAN
Group Members:
•Rabia Farooqui •Umm E Rabab Rizvi
•Aunuddin Qadri
•Rehman Siddique •Usama Batavia
•Sehrish Irfan
•Roshanna Durrani •Usman Farooq
•Saroosh Zahid
•Saad Imtiaz •Versha Qazi
•Shahrukh Samad
•Saad Zahid •Yawar Masood
•Syed Danial Mus
•Sadiq Samin •Zulfiqar sajwani
•Tayyaba Sami
Omar Mahmood

2. Numbers and Trends in Industry
•Growth in industrial sector rose dramatically in 1950’s
and 1960’s
oReason: Initial Investment
•The growth rates of small scale sector rose.
•Small scale sector was more productive in Pakistan.
•The shift of textiles from large to small scale.
•The growth of informal sector underestimated.
•Growth in mining & construction industry
remained volatile until 1970’s-economy began to
expand.

3. Numbers and Trends in Industry
•1970’s nationalization-increase in growth rates.
•Domination of public sector.
•1990’s privatization-role of private sector increased.
•Share of textile was the highest in the Manufacturing
Sector.
•Population rose but employment in formal
manufacturing industry reduced-employment rose in
informal sectors.
•Large scale industries became capital intensive.

4. The Small-Scale Manufacturing Sector
Characteristics
•Growth rates were higher than formal sector.
•Employment in informal sector rose dramatically
•The share of informal sector slightly increased.
•Textiles, fabricated metals and food and tobacco
were the largest sectors.
•Formal sector was highly capital intensive.

5. Emergence and Growth
•The green revolution in 1960’ssmall scale industry
began to grow.
•Demand for agricultural machinery rose.
•The devaluation of 1972 favored SSISSI products
were export oriented.
•Import liberalization industrial capital diverted to
exports paving way for SSI products.
•Cottage industries act of 1972 shift from LSM to SSI.
•1970’s and 1980’sremittances rose and home
demand increased.
•Middle class prospered.

6. Issues Affecting Small Scale Sector
•Unwaged family workers in small sector.
•Labor displacement in formal sector.
•Formal sector had high labor productivity
•Informal sector had higher capital efficiency.
•Government policy only favored LSM.
•This gave hands off policy to SSI.
•Linkages of LSM with SSI gave another boost to SSI.
•Unavailability of credit to SSI was the major issue.

7. Issues Affecting Small Scale Sector
•Other ways to obtain credit were used.
•SSI generated 25% of Pakistan’s export earnings.
•The government needed to provide SSI
appropriate credit packages.

8. Textile Industry and its crisis.
• Textile sector holds a significant position in
Pakistan
> employment
> value added
• Pakistan’s textile industry
was quite prominent and
emerging in world cotton
textile market in 1960’s
and 70’s.

9. Comparison of Pakistan’s Textile
Market with Hong Kong and Korea
• 1972 – Korea and Hong Kong had less share in
the world textile market than Pakistan
• 1988 – Pakistan’s poor performance.
-- Pakistan had lesser share than Korea
and Hong Kong

10. Reasons for decline
• Pakistan’s textile industry concentrated
amongst few industrial houses
• Performance of looms and spindles
• Shift from large scale to small scale
manufacturing and its impact
• Interest of state towards public sector
intermediate and capital goods industry
• Impact of Cottage industry Act (fragmentation
of firm size)

11. • Pakistan failed to diversify
• Relied only on growth in world market
• Pakistani entrepreneurs ignored up gradation
• Pakistan was unable to meet quotas of
advanced capitalist countries
• UNIDO pointed out factors that led to decline

12. Some facts
•Pakistan is world’s fourth largest cotton
producer.
•Pakistan is one of world’s largest cotton
exporter but its exports have low value added
•Low level of technology
•Pakistan occupies dominant position in low cost
low quality cotton fabrics market

13. Recommendations
• Pakistan must enter high quality textile market
• Improve quality standards
• Move into production of synthetic
fibres
• Invest in R&D of different types
of cotton, especially long staple
superior variety

14. Has Public Sector Industry Been a
Failure?
• Diminished role of the state
• Public sector
• Inefficient
• Costly
• Poor performance
• Drain on exchequer

15. • Nationalization program of ZA Bhutto in 1972
• Role of PIDC and success in jute, fertilizer, cement
industries
• Zia’s regime followed by
Privatization
• Socio-political goals of the
Government
• Studies of Asad Sayed
criticized by the World Bank

16. • Studies of Nawab Haider Naqvi and AR Kemal
include-
Rates of protection
Efficiency level
Allocative Efficiency
Capacity level

17. The Privatization Process
• Structural Adjustment Program begun in 1988
• 65% of targeted industries privatized
• Disinvestment and Deregulation Committee
 109 units to be privatized at earliest
opportunity
• New Privatization commission
formed in 1991

18. • Initially unsuccessful- Government
had to revise its policy
• More transparent and effective
procedures
• Transfer of 49 units to private
sector by 1992
• Reason of failure Companies were already bankrupt
• Energy, Telecom and Commercial
banks converted most.

19. • Lack of sufficient information for investors
• Process criticized for:
 Lack of transparency
 Inconsistency
 Favoritism and corruption
 Lack of planning
 Failure to float equity in market
• Naqwi and Kemals findings

20. Debate over Efficiency in Industrial
Structure
• By the end of 1960s, it was realized that elevating
growth required substantial costs.
• Industrial structure was highly inefficient.
• Reasons:
State intrusion
Too much emphasis on manufacturing sector
Ignorance to agricultural sector
Multiple exchange rates

21. – Taxes
– discouragement to technical change
– Unintelligent use of capacities.
– Wastage of resources
• However, growth still occurred. Most of the sectors
still showed growth prospects.
• Industrial sector did show vigor to develop and
advance.
• Many critics believe that the
inefficiencies have been overstated

22. • They believe that allocated inefficiencies were
remunerated by gains that followed.
• Many believe that this efficiency led to Industrial
Crisis in 1970s
• Overall, small scale industries were the nutrients
to Pakistani economy in the era.

23. • Public sectors efficiency cannot be denied, but
was much more widespread.
• Privatization was a political stunt, as per
opinion.
• Flaws were mostly structural.
• Consensus: Inefficiency was due to
overprotection and distorted
incentives.