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Industrial Sector in Pakistan

Industrial Sector in Pakistan

Issues and Opportunities

Since the dawn of the Industrial Revolution and the invention of assembly line techniques of mass production by Henry Ford, the industry has been playing a critical role in job creation, urbanization and expansion in world trade. In addition to economic significance, the industry has contributed massively to countries’ bilateral and multilateral relationships and has even helped them to play a dominant role in the realms of international law, politics, conflict resolution and neo-colonization of the developing and underdeveloped countries. A typical example is the United States of America that emerged on the international stage as a global power by dint of its vast and inexhaustible industrial power that endowed it with both hard and soft power to influence the decision-making of world’s political and economic institutions. Now the industrial power of nations has assumed strategic importance and every nation strives to expand and diversify its industrial power so as to enhance its geostrategic and geoeconomic relevance in world affairs. 

Just like the other developing countries, Pakistan also relies on its industrial power to reduce its trade deficit and strengthen foreign exchange reserves. Industrial sector consists of four subsectors: (1) Mining & Quarrying; (2) Manufacturing (Large Scale, Small Scale and Slaughtering); (3) Electricity Generation & Distribution & Gas Distribution; and (4) Construction. Though the industrial sector provides 20.88 percent share in our national gross domestic product (GDP) and is playing a critical role in job-creation and socio-economic advancement, our industry is reeling under chronic issues that are severely hampering its ability to contribute to national growth to its full potential. It is, therefore, pertinent to highlight the various challenges confronted by this important sector so that their viable solutions may be sorted out.

The challenges can be categorized into major areas of historical backwardness, economic constraints, social regression, administrative limitations and dependency on climate.

Historically speaking, the provinces constituting modern-day Pakistan have long been neglected by the British industrially, as a mainstay of their approach was to improve agricultural inputs so that the supply of raw material to their industry could be ensured on a sustained basis. Therefore, they invested massively in improving the agri-related infrastructure like irrigation system, and deliberately stifled local industries through tariff and competition. The situation can be best gauged from the fact that at the time of partition, out of 922 industrial units, Pakistan got only 34. This industrial backwardness meant that we started from scratch and had to mobilize our optimum human and material resources to ensure self-reliance in industrial products.

Economically, there are multiple problems that are responsible for the lacklustre and much-below-the-potential performance of our industrial sector. In this regard, flawed industrial policies like undue emphasis on import substitution strategy rather than export-promoting policies, negligence over developing heavy industries, the policies of blind nationalization and reckless privatization; non-utilization of mineral resources; lack of basic infrastructure such as roads and railways networks; liquid and flexible exchange rates; and poor credit mechanism can be quoted as the underlying economic causes that are creating hindrances in the realization of the potential of our industrial sector.

Energy crisis in the form of power outages and gas shortages has virtually held the industrial sector hostage. Although the previous government has added 11,000 MW of electricity to the national grid – thanks to CPEC-related projects – it failed miserably to curb the ever-ballooning circular debt in both electricity and gas sectors due to theft, line losses and recovery-related issues. Now that the circular debt has soared to Rs. 1 trillion in power sector and Rs. 160 billion in gas sector, given the already worsening economic situation, it is unlikely that the PTI government would be able to clear the circular debt instantly, so the curse of load-shedding, which is already causing a loss of 2 percent of GDP annually, is knocking at the door.

Read More: Comment, by invitiation: Don’t let Chinese imports kill Pakistan’s local industry

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