pakistan-studies-assignment-3-project-evolution-of-industries-since-creation-of-pakistan.docx

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Pakistan studies Assignment 3 project (Evolution of Industries
since creation of Pakistan)
Pakistan Studies (COMSATS University Islamabad)
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ASSIGNMENT#3
PAKISTAN STUDIES
DANISH SHAHBAZ (FA17-BCS-058)
QURAT-UL-AIN SAJID (FA17-BCS-075)
REHMAN ALI (FA17-BCS-076)
TAYYABA ISHFAQ (FA17-BCS-115)
SIR MUBEEN GOHAR
DEPARTMENT OF COMPUTER SCIENCE
COMSATS UNIVERSITY ISLAMABAD,
VEHARI CAMPUS.
2020

Table of Contents
1 Abstract...............................................................................................................................3
2 Introduction: .......................................................................................................................3
2.1 CONSEQUENCES OF KASHMIR WAR (1947-1948):............................................3
2.2 PROGRESS OF INDUSTRIAL SECTOR FROM 1950-1963 DURING PEACE
TIME .....................................................................................................................................4
2.3 STRESS ON INDUSTRIAL SECTOR DUE TO OPERATION GIBRALTAR.........5
2.4 INDUSTRIAL DAMAGE DUE TO 1965 WAR ........................................................5
2.5 LOSS OF INDUSTRIES DUE TO 1971 WAR ..........................................................5
2.6 COST OF KARGIL WAR (1999) IN SHAPE OF INDUSTRIES ..............................7
2.7 DOWNFALL OF INDUSTRIAL SECTOE DUE TO TERRORISM (2000-
ONWARDS):.........................................................................................................................8
3 Importance of Industrial Sectors in Pakistan....................................................................10
3.1 Increase in National Income......................................................................................10
3.2 High Standard of Living............................................................................................10
3.3 Economic Stability....................................................................................................10
3.4 Improvement of Balance of Payment........................................................................10
3.5 Progress in other sectors............................................................................................11
3.6 Increase in Employment............................................................................................11
3.7 Specialization ............................................................................................................11
3.8 Increase in agriculture production.............................................................................11
3.9 Simple to control industrial activity..........................................................................11
3.10 Technological progress..........................................................................................11
3.11 Control of population.............................................................................................11
3.12 Increase in investment ...........................................................................................11
3.13 Reduces pressure on land ......................................................................................11
3.14 Increase in Govt Income........................................................................................12
3.15 Price Stability ........................................................................................................12
3.16 Use of Raw Material..............................................................................................12
3.17 Use of Natural Resources ......................................................................................12
3.18 Political Control.....................................................................................................12
4 POSITIVE GROWTH TRENDS IN INDUSTRIAL SECTORS IN 2010-11..................13
5 NEGATIVE GROWTH TRENDS IN INDUSTRIAL SECTORS IN 2010-11................14
6 RECOMMENDATIONS..................................................................................................14
7 SOLUTIONS/CONCLUSIONS.......................................................................................15
8 REFERENCES.................................................................................................................16

TABLE OF FIGURES
Figure 1: SECTOR CONTRIBUTION TO GDP (%)................................................................7
Figure 2 : GDP GROWTH IN PAKISTAN (2001-2011) ..........................................................9
Figure 3: EXPORTS DETAIL.................................................................................................10
Figure 4: POSITIVE GROWTH TRENDS IN INDUSTRIAL SECTORS IN 2010-11 .........13
Figure 5:NEGATIVE GROWTH TRENDS IN INDUSTRIAL SECTORS IN 2010-11 ........14

Current Social, Economic and Political Challenges related to
Industrial sectorof Pakistan
(Evolution of Industries since the creation of Pakistan)
1 Abstract:
Basic purpose to make this study was to find out the determinants of industrial sector growth
in Pakistan. Factors were collected from the existing empirical literature. Annual data from
1950 to 2017 was chosen to make the analysis. Trade (% of GDP) and Personal remittances,
received (% of GDP) showed positive and significant association with Industry, value added
(% of GDP) and lag value of industry, value added (% of GDP) showed negative and
significant relationship with Industry, value added (% of GDP) in long run. But in short run
we also went through a lot of security issues during different times. Like the Pakistan went
through wars with India in 1998, 1965, 1971 and then we went through terrorism from 2011
to 2017. Graphs are shown to represent the downfall of our industry during those crucial
times.
2 Introduction:
One of biggest challenge to industry of Pakistan is “Security issue”. Security has always
been a threat to industrial sector of Pakistan. Pakistan started from very weak industrial base
and present situation is also not very good. Pakistan at the time of partition in 1947 had a
negligible industrial base. It got only 34 industries out of total 955, while remaining were
held by India. Such a small number of industries were not enough for a newly born country to
face the industrialized world. With the passage of time Pakistan utilized it’s all available
resources domestic as well as external for rapid development of manufacturing sector. But
due to wars in 1948,1965,71 and 1998 cause’s great loss of economy of Pakistan and it also
adversely affects the industrial sector of Pakistan. I will highlight the main event related to
security issues in history of Pakistan which disturbs the industrial Sector of Pakistan. Some of
events are given below:
2.1 CONSEQUENCES OF KASHMIR WAR (1947-1948):
The Indo-Pakistani War of 1947–1948, sometimes known as the First Kashmir War, was
fought between India and Pakistan over the princely state of Jammu and Kashmir from 1947
to 1948. It was the first of four Indo-Pakistan Wars fought between the two newly
independent nations. After getting independence Pakistan had very weak economy and war 0f

1947-1948 after few months destroyed the already fragile economy of Pakistan. Pakistan got
a total share of almost 200 million out of 40-50 % of that share was consumed in war and
there was not enough money to be invested in industrial sector of Pakistan. In 1947 it was
suggested in the Industrial conference of Pakistan to establish industries, which use locally
produced raw material like jute, cotton, hide and skins but Pakistan failed to achieve that
targets due to war after few months of birth of Pakistan.in 1947 Pakistan did not have any
building for offices. Office were being treated in tent which was less efficient and most of
people also did not want to invest in Pakistan because Pakistan was underdeveloped and there
was lot of security issues. Security issue was biggest problem in industrial progress of
country and as a result. The contribution of industrial sector was only 6.9% to GDP in 1950.
2.2 PROGRESS OF INDUSTRIAL SECTOR FROM 1950-1963 DURING
PEACE TIME:
Due to no war from 1950-1963 industrial sector of Pakistan make a lot of progress. In 1952
the Government took the initiative and established Pakistan Industrial Development
Corporation (PIDC) to invest in those industries which require heavy initial investment.
PIDC major investment was in paper and paper board, cement, fertilizer, jute mills and the
Sui Karachi gas pipeline. The Government also set up an Industrial Finance Corporation and
an Industrial Investment and Credit Corporation. The production capacity of the already
existing units like fertilizers, jute and paper was considerably expanded. The reduction of
export duties and the introduction of Export Bonus Scheme in 1958 increased export of the
manufactured goods. There was all round development of industries particularly in
agricultural processing food products and textiles. Moreover, in 1955-1956 to create skilled
human labor for rapid industrial growth, a Swedish Pak institute of technology was
established. Pakistan industrial technical assistance center (PITAC) was also established in
1957 in collaboration with UN USAID. The industrial policy of 1959 assured that the
maximum scope would be given to private enterprise in the development of countries
resources and indeed dropped one of two resumptions which were laid down in1948 in
respect of the private sector. Industrial policy of 1959 was laid renewed emphasis on private
sector and development of agro based industries with a particular focus on export industries.
The share of industrial sector to GDP rose from 9.7% in 1954-55 to 11.9% in 1959-60. In
1960’s there was a shift in the establishment of consumer goods industries to heavy industries
such as machine tools, Petro-chemical, electrical complex and iron and steel. The industrial

performance in terms of growth, export and productivity increased during the Second Five
Year Plan period.
2.3 STRESS ON INDUSTRIAL SECTOR DUE TO OPERATION
GIBRALTAR:
After a great progress of industrial sector of Pakistan during time period between 1950-
1963.another jerk was given to industrial sector of Pakistan in 1964.In 1964 Gibraltar
Operation was started by general Musa. Although Pakistan got succeed and won territories of
India but a lot of money was consumed in that operation and less money was invested in
industrial sector of Pakistan. The share of industrial sector to GDP also decreased in that year.
From `1950-1960 growth rate of large scale manufacturing was 15.4 but it was decreased to
13.1 in 1963-1964.
2.4 INDUSTRIAL DAMAGE DUE TO 1965 WAR:
Another jerk was given to industrial sector of Pakistan in 1965. In this year a great second
war was fought between Pakistan and India which result in loss of life as well as our
economy was adversely effected due to this war. Contribution of industrial sector to our GDP
was very much high from 1955- 1964 but as a war a great war was fought between Pakistan
and India so in 1965-1966 contribution of industrial sector to GDP was decreased from 11.9
to 10.1.the share of large scale manufacturing sector in GDP also got decreased from 13.1 to
12.2 in 196-1966. Economy of Pakistan was flourishing during time period of 1955-1964 but
suddenly got disturbed due to military wars and operations. Thus confirms that security issue
is a great problem of economy of Pakistan and it suffered a lot during wars. the most
far reaching consequence of the war was the wide-scale economic slowdown in Pakistan. The
cost of the 1965 war put an end to the impressive economic growth Pakistan had witnessed
during the early 1960s. The war in 1965 had proved to be too costly for our economy. It was
mainly the post-1965 war related socio-economic and political crises that had led to the 1971
war which further aggravated the economic environs forcing the residual Pakistan to suffer
economic stagnation for the next five years.
2.5 LOSS OF INDUSTRIES DUE TO 1971 WAR:
After 5 years of 1965, the third war was fought between India and Pakistan that did a great
loss to economy of Pakistan. As economy of Pakistan was flourish before 1965 war but
during period of next ten years (1965-1975) the share of industrial sector GDP got decreased.
The industrial performance in terms of growth, exports and production was disappointing

from 1971 to 1977. There were various reasons for the poor performance of the
manufacturing sector. One wing of the country (East Pakistan) was forcibly separated. The
Country had to fight a war with India in 1970. The suspension of foreign aid, loss of
indigenous market (East Pakistan), fall in exports, devaluation to the extent of 131%
nationalization of industries labor unrest, unfavorable investment climate, floods, recession in
world trade and reduction in investment incentives caused a fall in the output of large scale
industries. The annual growth rate fell to 2.8% in the industrial sector in this period. From
July, 1974to 1977, the Government initiated a large number of measures to revise the
economy. Cotton ginning rice husking and flour milling were denationalized. The private
sector was encouraged to invest in large scale industries. The annual growth rate in
manufacturing sector was 8.2% in the 1971's. The growth of large scale manufacturing
slowed down to an average of 4.7% in the first half and further to 2.5% in the 2nd
half of the
1970's. The oil price shock of the 1970s as well as droughts, floods and the withdrawal of
external assistance did not help the situation, either. The growth rate in the 1970s fell to 3.7
percent per annum from the 6 percent recorded in the 1960s.Worst of all, the main plank on
which the Bhutto government came to power social justice proved to be extremely weak.
Income inequalities rose compared to the previous period while inflation accelerated,
averaging 16 percent between 1971 to 1977, thereby hurting the poor.15 The largescale
manufacturing sector performed very sluggishly, netting a growth rate of only 3 percent.

Table 1:INDUSTRIAL SECTORS DETAILS
Figure 1: SECTOR CONTRIBUTION TO GDP (%)
2.6 COST OF KARGIL WAR (1999) IN SHAPE OF INDUSTRIES:
The Kargil War, also known as the Kargil conflict was an armed conflict between India and
Pakistan that took place between May and July 1999 in the Kargil district of Kashmir and
elsewhere along the Line of Control (LOC).Kargil war also effect the economy of Pakistan
and share of industrial sector to GDP Of Pakistan was also decreased. As war between two

countries disturb both countries and put them 5 years back. The GDP growth rate decelerated
to 4 percent. While the agriculture sector recorded higher output, growth of the
manufacturing sector was low. The investment ratio fell to 13.9 percent during 1998 and 1999
as foreign savings, which formerly bridged the gap between national savings and investment,
dried up in May 1998.The persistence of fiscal (above 7 percent of GDP) and external deficits
(4 to 5 percent of GDP) led to the accumulation of large levels of domestic and external debt
throughout the decade. Development expenditures took a major hit and GDP dropped to 3
percent from 8 percent in the first half of the 1990s. Social sector expenditures were squeezed
to accommodate higher debt service and defense expenditures. Total external debt levels
became unsustainable, rising from$20 billion in 1990 to $43 billion (47.6 percent of GDP) in
1998.the wasteful use of domestic resource was 5% in 1998.Exports stagnated and Pakistan
lost its market share in a buoyant world trade environment. The incidence of poverty nearly
doubled from 18 to 34 percent, and the unemployment rate rose as well.
2.7 DOWNFALL OF INDUSTRIAL SECTOE DUE TO TERRORISM (2000-
ONWARDS):
Pakistan has been fighting the war on terror, as a front line state, since September 2001. So
far, the war has brought huge destruction to Pakistan by slowing down the economic growth.
This paper attempts to study the social, political, and economic effects of the war on terror on
Pakistan from 2009 to 2011. Terrorism affects the economic growth of a country by lowering
foreign direct investment, capital formation, investment and increases risk perception. More
terrorist attacks at private citizens, property, transport and airports are related to lower capital
formation and low GDP per capita growth. The war has cost the country besides destruction
of infrastructure and $67.93 billion direct economic loss.4Pakistan is facing terrorist attacks
including suicide bombing which has deteriorated law and order situation and the foreign
investors are reluctant to invest in Pakistan that threat the industry of Pakistan in serious
manner. Pakistan is an agrarian economy and 45% percent of the population depends on
agriculture for earning livelihood. Our Agricultural industry also failed to make progress due
to terrorism.IN 2010-11 a large scale industries contribute 4.4 % and small scale industries
contribute 7.5% to GDP of Pakistan. During 2009 to 2011 the imposition of frequent curfews,
shelling and firing destroyed fruits and other agriculture commodities in Swat valley. It had a
negative impact on the local economy and also caused unemployment. From 2009 to 2011
foreign direct investment decreased as terrorism spread fear among the people and foreigners
were reluctant to invest in Pakistan. the Ministry of Finance, government of Pakistan has

proclaimed the Industrial loss of the country, due to war on terror, as $67 billion but it did not
mention how the cost was calculated. Due to less industries in Pakistan unemployment
increased from 3.12 million in 2009-10 to 3.40 million in 2010-11. The cumulative cost of the
war on terror from 2001-2002 to 2010-2011 is $ 67.9 billion.30 Table 3 shows that in 2004-
05 the direct cost of war on
terror for Pakistan was Rs 67 billion which increased to Rs 78 billion in 2005-06 and to Rs
262 billion in 2009- 10. Similarly, the indirect cost increased from Rs 192 billion in 2004-05
to Rs 707 billion in 2009-2010.If that much amount was to be invested in Industries then our
industries will be at their peak. This loss of money causes great loss to industrial sector of
Pakistan. Terrorism in Pakistan did a huge loss to economy of Pakistan and industrial sector
really got disturbed during these years. The current wave of terrorism is believed to have
started in 2000 and terrorism peaked during 2009.
Figure 2 : GDP GROWTH IN PAKISTAN (2001-2011)

Table 2: ACTUAL COST OF WAR ON TERROR FOR PAKISTAN FROM 2001-2011
Figure 3: EXPORTS DETAIL
3 Importance of Industrial Sectors in Pakistan:
3.1 Increase in National Income
Industrialization makes possible the best utilization of the limited resources of the country.It
helps in increasing the quantity and quality of various kinds of manufactured goods and thus
makes larger contribution to gross national product.

3.2 High Standard of Living
The Industrialization helps in increasing the value of output per work.The living standard of
the people is improve with the help of industrialization.
3.3 Economic Stability
Industrialization is the best way of providing economic stability to the country.A nation
which depends upon the production and export of raw material alone cannot achieve a fast
rate of economic growth.Many of the opportunities of investment is provided to the people.
3.4 Improvement of Balance of Payment
It helps in increasing the export of manufactured goods and thus earn foreign exchange. On
the other hand, the processing of raw material at home limits the import of goods and helps in
saving foreign exchange.
3.5 Progress in other sectors
Industrialization encourages progress in other sectors of the economy. A development of one
industry leads to the development and expansion of the other industries.
3.6 Increase in Employment
Industrialization increase in employment in the country. It also provides investment
opportunity to the people and savings of the people increase.
3.7 Specialization
The industrial labour force is more skilled and specializes than in the agriculture sector
because industrialization promotes specialization and skill of the labour.
3.8 Increase in agriculture production
Industrialization provides machinery like tractors, threshers, harvesters, bulldozers,
transport ,spray etc. to be used in the farm sector.
3.9 Simple to control industrial activity
The industry activity compared to agriculture is easy to control. The industrial production can
be expand or cut down according to the prices, cost and demand of the product.
3.10 Technological progress
Industrialization provides larger possibility for on the job training and technological progress.
The use of advanced technology increase the scale of production, reduces cost of production,
and improves quality of product.

3.11 Control of population
Industrialization leads to migration of surplus labour from farm sector to the industries
mostly situated in urban areas. In cities, improved facilities of sanitation and health care are
available.
3.12 Increase in investment
Industrialization increase the income of the workers. It improves their capacity to save. It
provides investment opportunity to the people.
3.13 Reduces pressure on land
The establishment and expansion of industries lessens the excessive pressure of labour forces
from the agriculture sector.
3.14 Increase in Govt Income
Industrialization increases the supply of goods both for internal and external markets. The
export of goods provides foreign exchange. It also provides benefit and income to the Govt.
3.15 Price Stability
The price stability can be maintained in the market with the help of production of industrial
products. More production of industrial sector removes the shortage of supply of goods.
3.16 Use of Raw Material
Raw material produced in the agricultural sector can be utilized in industrial sector, which not
only removes wastage of raw material but also supports the agricultural sector.
3.17 Use of Natural Resources
The natural resources are underutilized in developing countries. These natural resources can
be best utilized with the help of improved industrial techniques.
3.18 Political Control
Industrial development provides political control to a nation. Countries like U.S.A, Japan,
China, and U.K are among the nations of the world because of their industrial achievement
along with scientific development and progress.

4 POSITIVE GROWTH TRENDS IN INDUSTRIAL SECTORS
IN 2010-11
Figure 4: POSITIVE GROWTH TRENDS IN INDUSTRIAL SECTORS IN 2010-11

5 NEGATIVE GROWTH TRENDS IN INDUSTRIAL
SECTORS IN 2010-11
Figure 5:NEGATIVE GROWTH TRENDS IN INDUSTRIAL SECTORS IN 2010-11
6 RECOMMENDATIONS
Here are some suggestions to stabilize the industrial sector:
• Government must unveil a solid industrial policy keeping in view the global
requirements.
• In order to increase the share of the industrial sector in the GDP there is dire need to
establish new industrial estate in the country.
• To enhance the contribution of existing industrial estates in the economy they should
be facilitated by the government policies.

• Industrialists be given loans on easy installments, so as they could run industries
smoothly.
• New markets for the local products are explored and the quality of local products be
improved to increase the demand abroad.
• A coherent plan should be devised by the Pakistani government that allows some sort
of exemption/concession such as in India; the Export-Import Bank was set up for the
purpose of financing and facilitating the industries, especially textile.
• New technical universities and institutions be established for the guidance of the labor
and equip them with the modern techniques being used in the industry.
• Means of communication and basic infrastructure required for industry like roads,
transportation etc. should improved and enhanced to make the access easy.
• New and emerging entrepreneurs must be encouraged to lead the industrial sector and
make investments.
• The crisis of energy must be resolved on priority basis and interrupted supply of
energy to industry be ensured.
• Law and order situation be improved to allure the investors to invest their money and
time.
• More attentions should be given to increase export.
• Import substitution products are produced to encourage people to use local products.
• Realistic and up-to-date statistics is provided to this sector.
7 SOLUTIONS/CONCLUSIONS
• Firstly, security issue in Pakistan must be controlled. Intruders coming from
Afghanistan must be stopped. Government must take serious actions regarding to the
issues and complaints of Baloch and Pushtoon population of Pakistan.
• Mainly foreign intelligence agencies convince our young population against Pakistan
and Pakistan’s rule of law and they start playing in bad hands. To counter this
government must give serious concern to provide education to the young people and
also there must be awareness movement in remote area to alert them from the mindset
of enemies.

• Our foreign policy must be too strong that it is able to portray positive image of
Pakistan to the world to counter international media which is busy in spreading false
news about people of Pakistan
• The fencing on borders of Afghanistan and Iran must be done as soon as possible to
stop enemies and spies intruding in our country.
• Seminars must be arranged in educational institutions by our armed forces to show
them reality based facts regarding to the performance of our armed forces. And they
must alert our people from new threats like Manzoor Pashteen, BLA…etc.
• Our government should hold meetings with foreign investors and should convince
them to invest in Pakistan and this would help us to boom our industrial sector.
• Pakistan has great opportunity to convince foreign investors as CPEC has given
attention to Pakistan to make industrial zones at different places.
• Foreign investors and local investors must feel safe to run different industries and it is
possible if our security agencies personally go and assure them security and peaceful
environment.
8 REFERENCES
• WORLD BANK REPORT 2017.
• IMF CHECH ON INDUSTRIAL SECTOR OF PAKISTAN 2015.
• FINANCE MINISTRY OF PAKISTAN.
• RAWALPINDI CHAMBER OD COMMERCE AND INDUSTRY.
• “FINANCE DEVELOPOMENT AND TEXTILE SECTOR”
• COMPETETIVENESS: A CASE STUDY OF PAKISTAN BY MYHAMMAD
NADEEM
• HASNIF/ SABINA KHURRUM JAFRI.
• CONSTRAINTS FACED BY INDUSTRY IN PUNJAB PAKISTAN BY SYED
TURAB
• HUSSAIN/USMAN KHAN/KASHIF ZAHEER MALIK/ADEEL FAHEEM.
• THE SOCIAL POLITICAL AND ECONOMIC EFFECTS OF WAR ON TERROR,
PAKISTAN
• (2009-2011),
• BUSSINESS CLIMATE IN PAKISTAN CHALLENGES AND REMEDIES BY
ICMA.
• PAKISTAN.

• PAKISTAN ECONOMY AND NATIONAL SECURITY BY DR. ASHFAQ AHSAN
KHAN
• NUST ISLAMABAD.
• THE POLITICAL ECONOMY OF INDUSTRIAL POLICY IN PAKISTAN (1947-
1971) BY
• MUSHTAQ HASSAN KHAN SOAS, UNIVERSITY OF LONDON.
• ECONOMY OF PAKISTAN CHALLENGES AND PERSPECTS.
• HTTP://DSC1EDUCATION.BLOGSPOT.COM/2015/07/ECONOMICS-OF-
PAKISTAN-BCOM.HTML

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