Pakistan industries

STRATEGIC MANAGEMENT
Report On
“SUGGEST THE STRATEGY TO THE
PAKISTANI INDUSTRIES IN THE LIEU OF
GLOBALIZATION CHALLENGES.”
Group Members: Submitted to: Prof Dr. Mustaghis Ur Rehman
Osama Bin Raees
Muhammad Fahad Zameer
Abbas Naqvi
Muhammad Usman Khalid

Table of Contents
Introduction:.................................................................................................................................................3
Economy: ......................................................................................................................................................3
Overview of world economy:....................................................................................................................3
Dynamics of the Global Market: ...............................................................................................................4
Globalization: ...............................................................................................................................................5
History of Globalization: ...........................................................................................................................5
Causes of Globalization:............................................................................................................................6
Effects of Globalization:...........................................................................................................................7
Positive Effects:.....................................................................................................................................7
Negative Impact:...................................................................................................................................8
Pakistan: .......................................................................................................................................................9
Overview of Domestic Environment:........................................................................................................9
Economic and Industrial Background of Pakistan:....................................................................................9
Challenges for Pakistan:.............................................................................................................................11
Opportunities for Pakistan:........................................................................................................................15
Pakistan Positioning itself to meet the Challenges of Globalization:.......................................................16
Agriculture Sector ...................................................................................................................................16
Textile Sector ..........................................................................................................................................17
Leather Industry......................................................................................................................................18
Sports Good Industry..............................................................................................................................19
Energy Sector:.........................................................................................................................................19
Export..........................................................................................................................................................21
Import .........................................................................................................................................................21
Recommended Industrial Strategy of Pakistan Industries: ......................................................................22
Conclusion ..................................................................................................................................................25
References..................................................................................................................................................26

Introduction:
The acceleration in the global movement of capital and goods, termed 'globalization', carries both
immense opportunities and serious threats. Ultimately, it will be the international competitiveness
of firms that will determine how far opportunities are converted into lasting national benefits and how
far potential threats from heightened international competition result in serious cost. There is
widespread agreement that with important domestic policy changes and with the end of the
international textile and clothing quota regime, the economy of Pakistan is at an important
crossroads. The competitiveness of the industrial sector in the new, more liberal international and
domestic environment has a critical bearing one economic prospects for the foreseeable future.
Globalization carries both immense economic opportunities and potential threats for developing
countriessuch as Pakistan. The extent to which countries will benefit from globalization depends
on theinternational competitiveness of the private sector. From a policymaking-perspective, it
must be kept in mind that it is firms that compete and not nations. Thus, the government's role in
promoting competitiveness should be secondary to that of the private sector. However, due to the
failure of markets in critical areas and the lack of coordination amongst firms in certain sectors,
government support for firms is imperative in order to compete internationally.
Economy:
Overview of world economy:
The international financial crisis of 2008-09 led to the first downturn in global output since 1946
and presented the world with a major new challenge: determining what mix of fiscal and
monetary policies to follow to restore growth and jobs, while keeping inflation and debt under
control. Financial stabilization and stimulus programs that started in 2009-11, combined with
lower tax revenues in 2009-10, required most countries to run large budget deficits. Treasuries
issued new public debt - totaling $9.1 trillion since 2008 - to pay for the additional expenditures.
To keep interest rates low, most central banks monetized that debt, injecting large sums of
money into their economies - between December 2008 and December 2013 the global money
supply increased by more than 35%. Governments are now faced with the difficult task of
spurring current growth and employment without saddling their economies with so much debt
that they sacrifice long-term growth and financial stability. When economic activity picks up,
central banks will confront the difficult task of containing inflation without raising interest rates

so high they snuff out further growth. The collapse of the US sub-prime market
and worst ever global financial crisis has had serious repercussions not only for the developed
world’s economy but for developing markets such as Pakistan as well. The fallout has spread
through an extensively interlinked global financial market and resulted in tightening of credit and
general drying up pf liquidity. The impact of this crisis on the developing and emerging
economies is huge; the financial crisis backlash on the on the customer markets, the housing
markets, and more broadly on the process of investment in the production of goods and services.
Dynamics of the Global Market:
High technology activities have grown faster both in terms of production and
trade than other manufacturing activities (and trade has grown faster than production, indicating t
he increasing internationalization of industry in all economies). Not only are technology-
intensive industrial activities more dynamic, they tend to offer greater potential for sustained
learning and increased productivity, mores pill over benefits to other activities and more scope
for foreign direct investment (FDI) in integrated production systems that offer enormous export
possibilities. All production and export structures are thus not equal in terms of promoting
industrial growth and competitiveness. This does not mean that low technology and resource-
based products should be neglected in competitiveness strategy. Rather, such products
are the starting point for building industrial competitiveness in developing countries. The bottom
line' of competitiveness is to upgrade technologies in all activities, building new capabilities and
finding new markets and market niches. At the same time, the dynamics of world markets
suggest that it is necessary to promote structural change, and nearly all countries that have
maintained high rates of export growth have upgraded the technological composition of exports.
Growth of developing world exports of some resource-based and low technology products like
agricultural goods is held back by trade barriers, tariff escalation (higher tariffs being levied on
imports of processed products than on the raw materials) and subsidies in industrialized
countries. In low technology categories, rates of export growth are limited by slow expansion of
trade. Within these products, it is difficult for developing countries to upgrade to the most

advanced end of the value chain because of very demanding skill, design and branding
requirements. High fashion exports, for instance, remain the preserve of rich countries, as do
differentiated food products.
Pakistan is a weak performer when it comes to competitiveness. Its world market shares remain
small and its export structure dominated by low technology and low sophistication products.
Globalization:
Globalization is a process of interaction and integration among the people, companies and
governments of different nations. This process is driven by international investment and aided by
information technology. This process has effects on the environment, culture, political systems,
economic development and prosperity, and on physical well-being in societies around the world.
Globalization has powerful economic, political, cultural and social dimensions. Earlier most of
the business related and other interactions took place face-to-face, and were much localized but
now, the se interactions takes place across the globe and across great distances. There has been
significant delocalization. All sorts of businesses have adopted new technologies and reduced
face-to-face interaction to a great extent. The internet has facilitated globalization and has made
it possible to access information and resources across the world and to coordinate activities in
real time. Banks have call centers; retailers have online shopping options etc. People and systems
operating miles away influence the local neighborhood. For example, movement in the world
commodity and money markets can have an effect on people living across the globe. The speed
of communication and exchange, the complexity and size of the networks involved, and the sheer
volume of trade, interaction and risk gives globalization a peculiar force. Everything is
interdependent. Globalization has resulted in the decline of power of national governments to
direct and influence their economies. Shift in economic activities in USA and Japan are felt by
many other countries all over the globe. The role of government is still very essential in creating
the conditions for effective international governance, but it has to manage national politics in
such a way as to adapt themselves with the pressures of transnational market forces.
History of Globalization:
The origin of globalization can be traced back to the 16th
century when the West started to
explore new continents. The East India Company was the first multinational. The process of

global economic integration was carried out after World War II and the first Great Depression
when Britain and the US floated the idea of reconstructing the war-torn world monetary system
with a focus on freedom of capital movement. This led to a more liberal, capitalistic world. The
World Bank and International Monetary Fund aided and promoted free flow capital through
loans and reforms and steered the world toward economic integration, eventually leading to the
birth of the World Trade Organization. (WTO).
Causes of Globalization:
There are various causes that have contributed to the rise of globalization. A large number of
players including nation states; private investors; NGOs and MNCs; Information and
communication technology and declining costs of transportation are some of the driving forces to
expanding globalization.
 Decolonization: The policies of the colonial empires led to the rise of nationalistic
sentiments. The sensationalistic movements weakened the hold of colonial powers over their
colonies. The Second World War added to these weaknesses which resulted in the
decolonization process. Due to decolonization many new nation states were born and free
trade promoted and expanded.
 United Nations: World War II was so disastrous that to stop further wars and to resolve
conflicts more peacefully an organization was built of state nations. This organization
increased cooperation between countries and lead to a more global world.
 Collapse of the Soviet Union: The Collapse of the Soviet Union lead to more nations being
born and decreased polarity in the world thus making global trade easier.
 World Trade Organization: After World War II the demand for freer trade was strongly felt
to re build the economies damaged due to war and long colonization. In 1948 the General
Agreement on Tariffs and Trade (GATT) a treaty and International Trade Organization was
signed by 23 nation states. The purpose was to promote free trade. In 1995 GATT was
replaced by the World Trade Organization (WTO) which was the real step towards
international globalization as it had 142 members in 2001.

 World Wide Web: The World Wide Web has probably been the biggest driving force behind
globalization as it provides a cheap and effective means of communication to individuals in
all corners of the world.
Effects of Globalization:
As a result of globalization, the economic growth of both developing and developed countries is
impacted positively and negatively. Here are some of the positive and negative effects of
globalization.
Positive Effects:
It is not easier to discuss the extent of positive globalization in the world. However, the positive
impacts have been experienced in various societal demographic segments.
 Global market
The privatization of industries owned by the state has enabled the emerging markets to be
successful. Most of the companies are increasing the consumer demand through extension and
expansion of their value chain to international levels. As a result, the positive effects of
globalization are expressed by the rising transactions across the borders.
Globalization has resulted in the formation of multinational corporations. The concentration of
corporations in specific geographical economies has led to investment in other new geographical
areas, where market competition is very high. Due to increased competition, the corporations
continue to enlarge their market, in order to enjoy the economies of scale. This is because
globalization enables economies to compete fairly at all levels, hence attracting investors.
 Competition
Competition in the market is largely due to globalization. As a result, the positive effects are
visible, since global competition leads to products of high quality. The enhanced quality of both
products and services are based on production approaches of customer demands and customer
services.

For domestic companies to survive in the market, they are forced to raise their customer
satisfaction levels, as well as their standards, while fighting competition from foreign
companies. Besides, a global product must live to its goodwill when it gets into a new country.
For example, the competition between Samsung and Apple has raised the market standards, as
well as the customer service. Also, the two brands are living on their goodwill to survive the
competition.
 Culture
Globalization has resulted in numerous positive effects on culture. There is no single civilization
that had all good practices. Instead, the coming together of various cultures has made the world
today a better place. The welcoming of people from various backgrounds and civilizations has
resulted in the creation of new cultures, thus leading societal growth.
Negative Impact:
 Environmental Damage
Increased production means increased utilization of natural resources. Besides, increased trade
results to increased transport, which uses fossil fuels. As a result, pollution has increased,
leading to climate change. The changes in climate are now a serious threat to humanity and the
future of the world, all because of globalization.
 Fluctuation in prices
Globalization has led to increased market competition, hence leading to fluctuation in prices.
For example, developed countries like the USA have been forced to reduce their products prices,
because countries such as China offer the same products at cheaper prices. This is because the
production cost in China is lower than in the USA. As a result, for developed countries like the
US to withstand the competition and have customers, they are forced to lower their prices. The
impact is adverse, as the ability to sustain social welfare in the US gets reduced.

 Job insecurity
Due to globalization, most global economy jobs are insecure and temporary. The impact is
mostly felt in developed countries since they can outsource cheaper white collar and
manufacturing jobs. For example, wages and manufacturing costs are lower in India and China,
making countries like US and UK to outsource cheaper labor. The effect is people in developed
countries losing or having fewer jobs.
Pakistan:
Overview of Domestic Environment:
Pakistan’s macroeconomic environment is affected by the growth of the war on terror and
deepening of the global financial crisis which penetrated into the domestic market through the
route of substantial decline in Pakistan’s exports and a visible slowdown in foreign direct
inflows. Although contraction in export receipts in somewhat compensated by massive import
compression emanating from the global crash of crude oil and commodity prices, the external
sector vulnerabilities remain a threat. .Despite support from the IMF and other bilateral and
multilateral donors, Pakistan’s external account remains exposed to a lot of uncertainties.
Pakistan’s economy has lost significant momentum in the last few years. One of the prime
contributors to this derailing is Pakistan’s proactive role in the war against terror. A conservative
estimate has placed economic cost of this war for Pakistan at around US$35 billion since 2001-
02.
Economic and Industrial Background of Pakistan:
Pakistan has historically been an agricultural country. At independence, the economy of the
country was agrarian. The country had a per capita income of roughly US $60 which was derived
mostly from agriculture and more than 75% of the labor force was directly involved in
agriculture which provided60% of the total GNP. At that time, the country had no significant
industrial sector. The only large industries were agricultural processing industries like jute baling
(which was lost to Bangladesh in 1971), cotton ginning, wheat milling, rice husking and tea
processing. There was only one small oil refinery in what is now current day Pakistan, a few
cotton textile mills, a few sugar mills and one or two cement factors. The cottage industry

although present was completely undeveloped and undocumented. In 1949-50, the first year
when GDP was properly documented, the GNP from industry was 5.9% with only 1.5 % coming
from large scale manufacturing. Since then, the industrial sector of the economy has been
growing steadily. The progression of industrial growth in the first few years after independence
is shown in the table below which shows the share of small and large scale manufacturing in the
total GDP of the country.
This growth as can be seen came from mainly large scale manufacturing which is defined as a
manufacturing unit which employs more than 20 people and uses power. As can be seen from the
table, over this period, the share of small scale manufacturing in the GDP actually fell whereas
large scale manufacturing’s share grew. This growth came mainly from the cotton and jute
sectors; textiles, leather goods, matches, cigarettes and other consumer goods. From 1949-50 to
1954-55, industrial production grew at a rate of 23.6% per year. Thereafter, it slowed down and
in the period from 1955-60, it grew at an average rate of 9.3%. Manufacturing employment
however, did not rise at the same rate as output. Many reasons have been cited for this high
growth in manufacturing in the early days of Pakistan’s existence. Firstly, the industrial set-up at
the time of independence was abysmal so therefore, the country was bound to grow industrially.
Secondly, the initial economic policies of the government were also geared towards domestic
manufacturing. There was relatively much higher duty on consumer goods rather than capital
goods which encouraged industrialists to import machinery and start manufacturing locally.
Export duties were subsidized and tax holidays were provided to industrialists. Pakistan also
possessed important raw materials that could be used in manufacturing like cotton, jute and hides
and skins and a large domestic market for the goods produced. In addition to this, another reason
for the initial growth in industry was due to the fact that there was a strong desire to limit
dependence on India for industrial goods.

The table above shows the growth rate of large scale and small scale manufacturing in the first
four decades of Pakistan’s independence.
Challenges for Pakistan:
For Pakistan, the challenge of globalization is to position the economy within the evolving
constellation of cross-border relationships so as to seize opportunities for rapid growth. At
present, the country is more a recipient of globalization than a participant and needs to shift its
terms of engagement from passive to active involvement.
On the plus side, Pakistan has benefitted well from the cross border movement of workers.
Pakistani workers going overseas are a form of outward investment that has returned large flows
of remittances to the home economy. These remittances have had micro-benefits for low income
groups and poverty alleviation, and macro-benefits by stimulating domestic demand among a
rising middle class and relaxing external resource constraints. Remittance receipts increased
from 1 percent of GDP in 2000 to 7 percent in 2013, and the growth in remittances has outpaced
the growth in trade.
On the negative side, Pakistan has been complacent on investment and exports. It was not a
major recipient of the worldwide surge in FDI. There was little FDI in manufacturing, and
mainly in the extractive sector, which generates few economic spillovers. The FDI in services
(e.g., banking and telecommunications) was beneficial, but entailed foreign outflows of profits
and dividends (Hamdani, 2013). Pakistan has also not entered the dynamic segments of world
trade and was a latecomer to international production and global value chains. It imports
technology-intensive goods, but does not export technology-intensive products. The country’s

major manufactured exports are labor-intensive textiles and garments, which compete in a
saturated world market with declining terms of trade.
While Pakistan’s foreign trade and investment have been more open than those of its neighbors
since the 1980s, the latter have performed better. All three South Asian economies export
textiles, but India has also diversified its export structure and avoided declining terms of trade,
while Bangladesh has attracted FDI in garments to become a top global exporter, moving up the
value chain from “cut, make and trim” to OEM.
Complacency has placed the Pakistan economy on an unsustainable growth path. For some
years, investment and large-scale manufacturing have been stagnant and growth has been driven
by consumption (World Bank, 2014). The consumption boom has boosted the services sector and
small enterprises, but largely bypassed manufacturing (Nabi, 2010). Although the government
has managed the external balance reasonably well, a preoccupation with short-term stability
neglects the need for dynamic growth. The economy cannot sustain high consumption with low
investment growth. Indeed, Pakistan’s economic growth has been slowing down relative to that
of its neighbors and the average for developing countries.

Pakistan has so far focused its attention upon exports of merchandise goods only and neglected
the most dynamic element of world trade i.e. exports of services. The General Agreement on
Trade in Services has liberalized this sector and a number of developing countries have begun to
derive benefits. Pakistan has not been able to benefit substantially from the rapid growth of
services exports. It is a challenge for Pakistan to develop this sector. Another major challenge
faced by Pakistan is that it has 101 to 300 researchers per million people which is far below
Turkey, Tunisia, Azerbaijan and Lebanon’s 1001 or more researchers per million people and
Iran, Kazakhstan, Malaysia and Brunei’s 501 to 1000 researchers per million people. More
resources need to be allocated for research and development to strengthen the position on the
global scale. The political instability and the discontinuation of policies is another issue that
poses great challenge to Pakistan. It affects the proper functioning of the organization and
governance and adversely affecting the trade, social and economic development of the country.
The ongoing massive economic globalization and dispersion of information and technology is
changing the scale and nature of human enterprise. An important likely consequence of the
techno-economic-knowledge revolution is the erosion of equity, in the world, at the same time as
the tools for driving out inequity and poverty will become available to mankind. This is likely to
be an important challenge for Pakistan. Economies are likely to diffuse across national
boundaries into truly global supply chains, whether in industry, services or ownership. This
distribution of work and strategic linkages across national boundaries, coupled with information
integration, and a shift in the technological content of world trade towards high technology, will
be the most obvious features of the globalized economy of the future. There will be continuing
relocation of manufacturing and an increasing share of design and services from the developed
countries. Benefiting from relocation activities and investments, and developing into regional or
global hubs, would be major challenge for Pakistan.

Opportunities for Pakistan:
There are various opportunities for Pakistani industries in the midst of globalization. Pakistan is
located at the crossroads of three vital regions of the world i.e. South Asia, Central Asia and
West Asia. It has developed road, rail, and air links to improve the connection between the
regions. This includes trade routes, electricity grids, oil and gas pipelines, tourism and contact
between people in different regions. The cooperation with China for the transit of oil from the
gulf regions towards western China can be a good example.
Pakistan has close relations with major powers of the world like China, USA, Europe, Russia and
Japan. Similarly, it has been a founding member of regional and multilateral organizations such
as South Asian Association for Regional Cooperation (SAARC), the Economic Cooperation
Organization (ECO) between Pakistan, Afghanistan, Iran, Turkey and the Central Asia States,
the Organization of Islamic Countries (OIC) and the Asian Cooperation Dialogue (ACD). These
regional integrations can benefit Pakistan for leveraging the process of globalization.
There are various reforms made in various business sectors. The main reforms in the agricultural
sector have been the deregulation of prices and dismantling of the monopoly of the public sector
in mandatory procurement of major crops. Cotton, Rice and Sugarcane were already sold by
farmers to the private sector but recently it has been decided to allow the private traders to buy
wheat directly from the growers without the intervention of the Food Department. Imports and
exports of agricultural commodities have also been liberalized and private sector is allowed to
trade in these commodities. Import tariffs and export duties on these commodities have also been
abolished and there are no quantitative restrictions in place. Pakistani manufacturing sector was
one of the highest protected sectors among developing countries because of a high external tariff
structure and quantitative restrictions. Reforms in recent years have reduced the tariffs and
restrictions. This is certainly an opportunity for the manufacturing sector to trade freely.
Pakistan is a major producer of Cotton. Textiles are relatively more labor intensive which
confers price advantage upon its exports. During the last few years, textile industry has invested
heavily in modernization and replacement and imported new machinery worth $1 billion. This
has certainly improved the productivity, quality of products and capital efficiency. As the U.S.
and European firms become uncompetitive in textile and apparel business, Pakistani firms should
enter into joint venture agreements with them for technology transfer and marketing. This

combination of natural comparative advantage, renewal of capital equipment, investment in
training and skill up-gradation and joint ventures with Western firms should enable Pakistan to
move up in the global market. A serious difficulty in expanding Pakistani exports has been the
continual problem of low, uneven and inconsistent quality of products. National Accreditation
Council has been formed by the government to check the quality of products in order to bring
these to internationally accepted standards. About 2000companies have been given ISO 9000
certification. With this certification, the acceptability of products of these companies has
increased in foreign markets. In future, Pakistani companies will have to prepare themselves for
meeting the standards of social and environmental audits to be able to sell their goods in global
markets.
Pakistan Positioning itself to meet the Challenges of Globalization:
This part of report assesses as to how far Pakistan is positioning itself to meet the challenges of
globalization. Although there are a large number of known and unknown variables which affect
this choice we have identified at least ten factors which, in our opinion, are critical.
Agriculture Sector: The main reforms in agriculture sector have been to free agriculture
markets for products and inputs by deregulating prices and dismantling the monopoly of the
public sector in mandatory procurement of major crops. Cotton, Rice and Sugarcane were
already sold by the farmers to private sector but recently it has been decided to allow the private
traders to buy wheat directly from the growers without the intervention of the Food Department.
Farmers receive market-based prices equivalent to export or import parity but they are
safeguarded against excessive volatility in prices through the second buyer channel which is the
Government. Imports and exports of agriculture commodities have also been liberalized and
private sector is allowed to trade in these commodities. Import tariffs and export duties on these
commodities have also be abolished and there are no quantitative restrictions in place. Removal
of subsidies, expansion of water storage and distribution channels, efficient use and conservation
of water through land leveling and lining of water courses, constructing spines for disposal of
drainage effluent to avert salinity, introduction of new seed varieties, encouraging corporate
agriculture to bring vast tracks of uncultivable land under cultivation are some of the measures
which are being implemented to enhance productivity in agriculture sector. Productivity gains
will lower unit cost of production thus making agricultural exports from Pakistan competitive in

international markets. As agricultural subsidies and support for production in the OECD
countries are hopefully removed under the new WTO Development Round Pakistan should be
able to capture a share of global commodities market particularly in the proximate geographical
areas.
Textile Sector: The termination of Multi Fibre agreement (MFA) in 2004 presents an enormous
opportunity for Pakistani textile producers. As future market shares will depend on price and
quality advantage as compared to the current quota regime it will facilitate efficient and low cost
producers to enlarge their share in the North American and EU markets. Simulation results have
shown that Pakistan will be one of the few developing countries which will retain its
competitiveness in international textile trade. Pakistan is a major producer of Cotton and textiles
are relatively more labor intensive which confers price advantage upon its exports. During the
last two years, textile industry has invested heavily in balancing, modernization and replacement
and so far imported new machinery worth $ 1 billion. This will certainly improve the
productivity, quality of products and capital efficiency but equal attention needs to be given to
the training and up gradation of skills in textile industry at all levels. The institutional
infrastructure such as Textile University, Textile Institutes etc. does already exist in the country
but the quality, staffing, standards of instruction, curriculum and its relevance to subsequent job
requirement are the issues which need to be quickly resolved. Employers should invest in on-the-
job training and organize in-house courses in basic literacy for those are illiterate as the pay-off
from this investment will be quite substantial in form of higher labor productivity and higher
returns to the firms making such investments. Induction level training and apprenticeship are the
other tools which can help upgrade the quality of manpower in textile industry. The recent shift
to value added goods within textile sector requires developing capability in design, processing,
inventory management, marketing and keeping track of the fashions and changing demand and
adapting products to meet this demand on time maintaining the quality. Pakistan should also take
advantage of high growth in the volume of trade in synthetic textiles. A number of synthetic fibre
plants have already been installed in the country but there is a need to expand the capacity and in
some cases to reduce the end-use price through increased efficiency or scale economies. As the
U.S. and European firms become uncompetitive in textile and apparel business, Pakistani firms

should enter into joint venture agreements with them for technology transfer and marketing. This
combination of natural comparative advantage, renewal of capital equipment, investment in
training and skill up gradation and joint ventures with the Western firms should enable Pakistan
to move from its existing rank to become the 5 th largest exporter of textiles and apparels as
envisaged in the Textile Vision 2005.
Leather Industry: At the time of independence, Pakistan only had a few leather tanneries.
However, the abundance of raw material for leather in the form of skins and hides has allowed
the industry to expand and flourish over the years. Currently, the leather industry is the second
largest export-earning sector of Pakistan after textiles, and this sector is contributing around $800
million a year but has the potential to increase the volume of exports with the improvement of
quality and diversification into a different range of products, specially garments and foot wear.
The major areas in leather include leather garments, leather gloves, leather footwear, handbags,
Keychains, wallets etc. the leather industry is mostly export oriented and about 80% of all
manufactured products are exported. Therefore, with improved quality, better marketing and
more value addition, this industry has the potential to grow even further. Major buyers of
Pakistani leather and leather garments include Italy, Spain, Portugal, South Korea, Germany,
France, UK etc. the table below shows Pakistan’s share in the global leather market in the year
2002-03.

Sports Good Industry: The sports goods industry in Pakistan for a very long time was just
simply a cottage industry with women and children sitting at homes and hand stitching footballs.
However, in recent times, the industry has developed into a large and growing industry. Till a
few years back, Pakistan was the world’s largest producer of footballs producing approximately
90 % of the footballs used in the world. However, a child labor controversy has forced
manufacturers to rethink their traditional methods and become more centralized. Also, balls
manufactured using thermal bonding have become more popular in the world as well and are
gaining more and more momentum as compared to the hand stitched ones that Pakistan has
traditionally been producing. Pakistani manufacturers are losing out to their Chinese counterparts
in this respect since we do not possess production facilities or the skills in terms of human
resource to produce the mechanized football. Manufacturers having realized this are now trying
to move toward thermal bonding and manufactured balls as well. However, this has led to costs
rising and therefore, the export of sports goods from Pakistan in 2008-09 has declined by about
10% compared to the preceding year; from$302.72 million in 2007-08 to $273.69. Despite this,
Pakistan still produces about 85% of the world’s hand-stitched footballs, which is about 40
million units per year. The global market for hand-stitched footballs stands at around 45-50
million units per year, but the mechanized variety sells at least twice as many. It is a growing
market, while the traditional balls are a stagnant commodity which is bound to go down further
in the years ahead. Therefore, it is imperative that Pakistani manufacturers look toward the future
and focus more on the manufactured football rather than the hand stitched one. By doing this,
Pakistan can substantially increase its global export earnings.
Energy Sector:
The world energy scenario during 2008-09 has been very eventful. International oil prices
fluctuated widely; leaving all vulnerable oil import countries like Pakistan under great stress. The
volatile energy picture not only made major dents in the macroeconomic variables but also
eroded the purchasing power of the poor Pakistan has experienced a slowdown in all economic
activities as a result of international financial crisis and demand contraction polices of the
government. The major impact has been experienced in the industrial sector. Energy
consumption being an integral part of all the economic activities has also declined as a result of
the economic slowdown. Energy in all its form has declined or at least remained somewhat

stagnant during the fiscal year 2008-09. The most prominent has been the large scale
manufacturing sector which due to its negative growth of 7.7% experienced decline in energy
consumption and vice versa.
The energy consumption mix of Pakistan has changed over the past few years. The above pie
charts show the changes occurred.
Natural Gas: Government is making efforts towards enhancing gas production in order to meet
the current demand of the country. As of Jan 09, the recoverable reserves of natural gas have
been estimated at29.671 trillion cubit feet. Presently 26 private and public companies are
engaged in oil and gas exploration & production activities.
Electricity: after recording an average consumption growth rate of 6.1% per annum since 1999-
00 to2007-08 the consumption by different sectors increased merely 0.7% this year. This is
mainly due to shortage of electricity, its higher cost due to gradual phasing out of a subsidiary on
electricity and circular debt problem.
Coal: Pakistan has large coal resources estimated at over 185 billion tones, including 175 billion
tones identified in Thar, Sindh province. The production of coal has remained stagnant with no
significant market demand. The production of coal decreased by 28.8% during July-march 2008-
09. About 60.4% of total coal production in the country has been consumed by the brick kiln
industry followed by cement and then power.

Export:
Pakistan’s exports consist of the following sectors:
Food group: During this fiscal year, the food sector has performed very well; almost all the
subcategories of food sector have shown a good performance. Rice is a cash crop for Pakistan
and is a major contributor to the food sector with a growth rate of 35%. Although the price of
rice has declined internationally, Pakistan has been putting up an impressive performance.
Textile Manufacturers: Although this sector has shown a decline in exports, it still has the lion’s
share of exports, contributing more than 50% of total exports. During the period under review,
the global economic meltdown resulted in declining demand for textile manufactures. Other
contributory factors include energy supply constraint, political and law and order situation and
constricted credit availability.
Petroleum sector: In absolute terms, the exports of petroleum products increased by $ 4.6 million
because of a 10.7% increase in its unit value. However, the main petroleum product, Naptha
decreased by $276 million.
Other Manufactures: Other manufactures include surgical goods, sports goods, leather industry,
Cement, Carpet and rugs. Some of these industries have been outlined earlier in this report.
These industries have also shown growth by standing at 19.9% in total exports. The major
contributor in this sector was cement sector that showed a growth of 8.02%.
The global financial crisis has had an effect on Pakistan’s exports as well. So except the gulf
market or to be very specific Saudi Arabia, Pakistan’s exports to other countries has declined.
Import:
Pakistan’s imports this year declined by 9.8% mainly due to a fall in International Oil prices that
were reflected in a lower oil import bill. The other reason for lower imports is depreciation of the
rupee. In addition to this, an increase in the supply of some crops like wheat, pulses and tea have
also reduced the import bill.

More than three-fourth of Pakistan’s imports consist of just eight items with oil alone making up
28.4%of imports; an increase from 26.4% over last year. Machinery imports accounted for
18.9%. This machinery is mostly heavy machinery for the industrial sector. The third contributor
is chemicals; the imports of which have grown from 12.45 to 13.5%. Transport equipment and
fertilizers have shown a massive decline in imports. More than 10% of Pakistan’s imports come
from Saudi Arabia, followed second by Kuwait.
Imports are of two categories; consumer goods and capital goods. Since 1990, imports of raw
materials for consumer goods have been greater, but recent trends have shown a slight increase
in the import of raw material for capital goods. Import of manufactured capital goods however,
are showing a continuous decline while manufactured consumer goods imports are slightly
increasing. Imports have shown an increasing trend because of high demand for oil that leads to
more imports from Saudi Arabia and Kuwait. In addition to this, machinery is imported from
Japan, Germany and China. Despite being an agrarian economy, Pakistan also imports some food
items like wheat from USA.
Recommended Industrial Strategy of Pakistan Industries:
The development of a strategy involves five main steps.
 The first is a detailed assessment of the industrial sector and main sub-sectors. This involves
evaluating industrial performance in domestic and export markets and the main drivers of per
formance (macroeconomic and policy framework, human resources, technology, FDI,
finance, physical infrastructure and supporting institutions). Where possible, evaluation shoul
d usequantitative benchmarks against selected comparators (within the region, in other
developing regions that are likely to offer direct competition to Pakistan and in more
advanced countries that serve as role models). We hope to have made a start in this
benchmarking exercise by drawing on readily available international data and some recent
work on the investment climate in Pakistan. Naturally, informed qualitative judgments
require a much more in-depth knowledge of the local industrial sector than we possess.
 The second stage is the development of a national 'strategic vision'. The vision should reflect
the interests of all stakeholders, including the private sector, government institutions,

employers ‘organizations, trade unions and so on. In this step, the government needs to
define short and long-term industrial goals and to start planning on how to strengthen or
create capabilities to reach these goals. The vision should inform priorities for public
expenditure.
 The third stage is to design policies and programs.
 The fourth step is to implement these policies and programs.
 The fifth is to monitor the progress of the strategy, assessing its success and adjusting it as
necessary.
In this modern world of globalization and rapidly changing technology, there is a dire need to
make and develop a strategy that would help Pakistan compete internationally. The development
strategy should base on the sectors and industries that have huge potential and growth
opportunities and where Pakistan has a comparative advantage. Capital flows and trade needs to
be given priority. Private capital flows to developing countries are now far larger than official
development assistance. Foreign direct investment in developing countries has become a major
determinant of successful economic performance. It has been the key to the East Asian success
story. FDI has not only provided capital, but it has been the means through which production in
these countries has become part of the international supply chains. FDI should be treated as a
remedy for Pakistani industrial growth. The result would be in technological exposure and
markets will definitely increase exports. FDI from industrialized countries, particularly Japan,
played a crucial role in the success of export-oriented growth policies of the East and Southeast
Asian counties. However, now FDI from developing countries such as China
and India is gaining importance. Thus, Pakistan’s developmentstrategy must aim to take
advantage of these trends and use FDI, particularly from China and India, to hook Pakistani
producers into international networks and supply chains. Trade is also major factor of
Globalization that could really help Pakistani industry increase exports. Implementation of WTO
resulted in reduced trade barriers and continuous reduction in transport and communication
costs. This has forced developed countries to transfer their industries to developing countries.

The rise of China as the industrial workshop of the world may be the culmination of this process.
Pakistan must go for greater market access through bilateral, preferential trade agreements and
free trade agreements with other countries and regional trade agreements both within and outside
the South Asian region. The ties in the form Free Trade Agreements with its neighbors like India
could help Pakistan in increasing its exports as there is a huge market there. Trade with China
and technological transfer will also help us in machinery up-gradation, technical knowhow.
Diversifying the export base in markets like the EU, US will help increase exports as well.
Pakistan has no presence in many markets including Africa; efforts in this direction, would go a
long way in increasing Pakistani exports. The up-gradation of machinery for production needs to
be done on an immediate basis to reduce cost and gain maximum efficiency. Bigger industrial
units (whether as joint ventures with countries like China or as Pakistani-
owned enterprises), need to be set-up to produce more efficiently and in surplus. Agovernment
supported fund should be set up for manufacturers to upgrade their technology and capacity.
Capacity Utilization is another method to achieve economies of scale and cost advantage; sectors
like cement and textile are underutilized and should increase their capacity utilization levels.
Low productivity reduces any labor-cost advantage that a Pakistani manufacturer may have in
terms of lower wages. In order to achieve maximum cost advantage, the productivity of workers
should be increased through proper training and a skilled labor and workforce. Courses in a wide
range of technical skills, including the ability to read and comprehend technical drawings and
technical manuals should be provided to the workforce in order to improve their skill set. The
importance of services sector to Pakistan’s economy has substantially increased over the last
three and a half decades whereby the share of services in GDP has reached more than 50%.
The exports of Information Technology and IT Enabled Services (ITES) could play major a role
in accelerating and sustaining high growth in the export sector. The scope for accelerating export
earnings for a country which succeeds in building a competitive IT and ITES export sector is
considerable. In India, the expanding IT export sector has had a dynamic impact on the whole
economy by improving management capabilities and developing entrepreneurs with accumulated
capital who eventually invest in other sectors of the economy.
International experience suggests the value of setting up an industrial competitiveness agency
headed at a very senior political level which can mount a strategy to cut across competing

interests and coordinate the ministries concerned. For example, in Pakistan’s context this might
involve combining the work of the Trade Development Authority of Pakistan and the Board of
Investment. Then comes the task of allocating resources at various levels. At the highest level, it
has to be decided which generic areas; education, infrastructure, finance, science and technology,
and so on have to be addressed. This needs a strategic 'vision' of what the main engines of
industrial competitiveness are going to be.
Conclusion:
Pakistan is strategically located to be a regional manufacturing hub. Although an ambitious goal
for a latecomer, it illustrates the grand visionary design expected of a development state.
Moreover, China’s recent announcement to make a five-year investment in the US$ 46 billion
Pakistan–China Economic Corridor suddenly makes that goal less audacious. The government
must sustain the momentum with a vigorous policy thrust to support investment-led growth. A
high GDP growth target is meaningless unless driven mainly by investment (and not
consumption). This requires a revitalized industrial policy endorsed by industry. The policy
should address the technological weaknesses of the manufacturing sector. Complementing the
focus on domestic industry are dual needs: (i) to incentivize trade, particularly exports; and (ii) to
attract FDI for exports, working with foreign companies already present in Pakistan to integrate
those activities into their global operations. Pakistan is a latecomer to globalization, but the
nature of the process is such that rapid advance is possible with smart policymaking and
determined collective effort. The challenge is not beyond reach.

References:
 Aziz, S. -F. (2006, May 15). Globalization: The Challenges and Opportunities and Role
of Pakistan.
 Doshi, G. (n.d.) The Pakistan Industry - An Overview Retrieved
from http://ezinearticles.com/?The-Pakistan-Textile-Industry---An-Overview&id=708009
 Gardezi, H. N. (2005, February 6). Globalization and Pakistan's Dilemma of Development
 Global Imperatives - Challenges and Opportunities (n.d.). Retrieved from Vision 2003 -
Planning Commision: www.pakistan.gov.pk/.../Chapter%20Wise/Ch%202,%20Global%20I
mperatives,%205-8,.pdf
 Grieco, J. M., & Ikenberry, G. J. State Power and World Markets. In
Economic Globalizationand Its Discontents.
 Husain, I. (n.d.). How Pakistan is positioning itself for challenges of globalization?
 Hussian, Y. (2006, August 31). Pakistan’s IT Revenue May be Grossly Understated
 Retrievedfrom http://www.pseb.org.pk/UserFiles/documents/IT_Revenue_Understated_V1.4
.pdf
 Industrial Competitiveness - The Challenge for Pakistan. (2004, October 29). ADB Institute
 Industry Overview (n.d.). Retrieved from http://www.pseb.org.pk/item/industry_overview
 Ishtiaq, H. (2009, August 24). Upgrading Sports Goods Industry
. Retrieved fromhttp://www.dawn.com/wps/wcm/connect/dawn-content-library/dawn/in-
paper-magazine/economic-and-business/upgrading-sports-goods-industry-489
 Kemal, A. (1998). Industrial Development of Pakistan. AERC Conference
 , (pp. A.R Kemal- paper on “industrial Development in Pakistan” presented at the
AERC conference in 1998.).

 Khan, H. I. (2007). Pakistan - Globalization and protection of foreign trademarks. Building
and enforcing intellectual property value 285-287.
 Macdonald, D. (1997). Industrial Relations and Globalization: Challenges for
Employers and their Organization.

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