Week 2 30092023 070359pm

GROWTH OF
INDUSTRIAL SECTOR
Saima Ashraf
What is Industrialization?
Industrialization is the transformation of a society
from a primarily agricultural to an industrial one,
involving mechanized mass production, assembly
lines, and increased labor productivity and
efficiency, facilitated by affordable energy and
strong fiscal and monetary incentives.
Industrial Revolutions that Shaped the World
1. The First Industrial Revolution of 1765 (Mechanization.)

End of the 18th century to the beginning of the 19th. Agriculture started to be
replaced by the industry
2. The Second Industrial Revolution of 1870 (Technological
advancements)
End of the 19th century, new source of energy—electricity, gas, and oil.
3. Third Industrial Revolution 1969 computers electronics
20th century
4. Fourth Industrial Revolution (Artificial intelligence (AI))
Ability of a computer or a robot controlled by a computer to do tasks
GROWTH OF INDUSTRIAL SECTOR
FROM 1947 TO 1950
• Out of 955 industrial units operating in the British India, Pakistan got
only 34 industries i.e. 4% of the total industries established in the
Subcontinent.
• These industries were small size and based on raw material such as
small sugar mills, cotton ginning factories, flour mills etc.
• In 1947, Pakistan's Industrial Conference recommended establishing
locally produced industries using locally produced raw materials. The
government established Industrial Finance Corporation and
Investment Corporation, encouraging private entrepreneurs.
• The contribution of industrial sector was 6.9% to GDP in 1950.
GROWTH OF INDUSTRIAL SECTOR IN
1950'S
• In 1952, Pakistan established the Pakistan Industrial Development
Corporation (PIDC) to invest in industries like paper, cement, fertilizer,
jute mills, and the Sui Karachi gas pipeline, fostering self-sustaining
growth.
• New industries emerged, expanded production capacity in existing units
like fertilizers, jute, and paper, and exports increased through reduced
duties and Export Bonus Scheme in 1958.
• There was all round development of industries particularly in
agricultural processing food products and textiles. The share of
industrial sector to GDP rose from 9.7% in 1954-55 to 11.9% in 1959-
60
PERFORMANCE OF INDUSTRIAL SECTOR
IN 1960’S
• In 1960’s there was a shift in the establishment of consumer goods
industries to heavy industries such as machine tools, 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.
• The share of industrial sector to GNP went up to 11.8% from 1960 to
1965.
PERFORMANCE OF INDUSTRIAL SECTOR
IN 1970'S
From 1971 to 1977, Pakistan's industrial performance was disappointing due to
factors such as
• War with India and separation of east Pakistan
• Suspension of foreign aid
• Loss of indigenous markets,
• Export decline and devaluation
• Labor unrest and unfavorable investment
• Climate and floods
• Recession in world trade and reduced investment incentives.
• The annual growth rate fell to 2.8%, and the government-initiated measures to
revise the economy.
1st Five Year Plan
• The first five-year plan (1955-1960) allocated Rs. 7.5 billion to the public
sector and Rs. 3.3 billion to the private sector. The government selected
sugar, cement, cotton and textiles goods for protection aiming to
influence private investment through policies and import licensing
powers, resulting in a consumption-oriented economy.
2nd Year Plan
• The second plan was larger, with agriculture receiving more funding. The
government targeted industries like sugar, vegetable ghee, jute, super-
phosphates, soda ash, and caustic soda. Growth exceeded planned
rates, fueled by massive aid inflows and a more capable government.
3rd Year Plan
• The third-year plan (1965-70) aimed to achieve success but faced significant
economic deterioration due to the Indo-Pak war, diverted resources to
defense, and interrupted aid inflows. Industrial output declined, and import
liberalization was reversed in 1966/67. By 1968, aid inflows reduced, and
productivity declined due to inefficient public sector enterprises.
• The third wave of industrial policy in Pakistan (1971-1973) led to the
nationalization of large-scale manufacturing, with public sector
corporations financing the sector. The Board of Industrial Management
(BIM) controlled 32 major enterprises, making the sector inefficient. In
1977, the military government recommended the abolition of these
institutions.
4th Year Plan
• The fourth wave of industrial policy in the 1990s began with the return of
democracy in 1989, consisting of deletion policy, deregulation measures, and
privatization. Despite efforts to improve industrial activity, privatization failed
due to lack of pro-competition laws. The Small and Medium Enterprise
Development Authority was established for product improvement.
5th Year Plan
• The fifth wave of Pakistan's economic growth (1999-2008) saw the private
sector gain prominence, leading to major developments in the automobile
and consumer electronics industries. Macroeconomic stabilization and
structural reforms increased GDP growth, but Pakistan's HDI ranking and
technological development remained low.
2008 Onwards
• The 2008 fiscal crisis and lack of innovation support hindered
entrepreneurs' confidence.
• Trade liberalization was successful but insufficient for Pakistan's
growth. The textile industry's inability to benefit from the Multi-fiber
Arrangement in 2005 was a result.
• The Musharraf government's industrial policy was specific to different
sectors and lacked a consensus-driven vision.
Causes of Industrial Drawback
• Political Instability
• Lack of Capital
• Limited Market
• Peoples’ Liking to Foreign Goods
• Under Utilization of Labors’ Potential
• Communication And Transportation
• Technical Know How
• Energy Crisis
• Economic Restrictions
• Lack Modern Technology
• New Competitors
• Low Foreign Investment
• High Interest Rate
• Granting MFN Status To India
Methods of Privatization
• Sale of Entire Entity
(government sells entire public unit to private sector)
• Initial Public Offerings

(government issues share to public offerings to reduce its share)
Establishment of Privatization Commission
• The Privatization Commission is established as a corporate body under

the Privatization Act, 2005.

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GROWTH OF

1. The First Industrial Revolution of 1765 (Mechanization.)

• Initial Public Offerings

Establishment of Privatization Commission

• The Privatization Commission is established as a corporate body under

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