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Industrialization and its importance to the economic development of Pakistan
Industrialization and its importance to the economic development of Pakistan
With a population of 150 million, Pakistan is the country with the most rapid growth in population in the world. It is a developing country, with arable land area accounting for 27% of the total and with agriculture dominating in the economy, well renowned as "Fruit Basket". The number of laborers engaged in agriculture accounts for 51% of the total nationwide. Pakistan is relatively good at product marketing Pakistan has been confronted with the difficulty in sustained development, all its electric power, highways, communication system, housing and traffic are in sustained development, and all its electric power, highways, communication system, housing and traffic are in a state of insufficiency. Several successive terms of the Pakistan government have implemented, system reform policies over the past six years so that the economic liberalization has become a more distinctively market oriented economy. The role of the government in economy continues to weaken. In 1996, public enterprises contributed 30% to the added value in the manufacturing sector. After selling 80% of the industrial enterprises, the government is still continuing to decrease its ownership on enterprises. Although cotton-based-textile production dominates the whole manufacturing industry, agricultural production level still continues to step down. Pakistan is in urgent need for generation plants and for improving infrastructures. If Pakistan can keep political stability, it will maintain a satisfactory growth rate, develop a lot of new type privatized industries and increase their opening in foreign trade. The industrial output value accounts for about 25% of the GDP. The textile and other light industries play a leading role in industry, with cotton textile industry being the largest industrial sector. The government encourages the development of export industries and puts and development of import substitute industries on top priority. The energy industry is the bottleneck of the national economy of Pakistan, with per capita energy of only 0.19 ton petroleum equivalent, an extremely low value even in developing countries. The power generation capacity cannot satisfy the need of economic development. Foreign trade is growing and adverse balance of foreign trade is enlarging. In the current year, the export of Pakistan exhibits a tendency of growth and foreign exchange earnings have notably increased. However, as a result of the soaring price of petroleum globally and the unexpected import of sugar, foreign exchange used for import has significantly increased and easily balanced out the growth rate of export, thus enlarged adverse balance of foreign trade. The export target of Pakistan for the whole year is US$ 10 billion, and the import target is US$ 11 billion. But according to the current progress, adverse balance of foreign trade has exceeded the US$ 1 billion target for the whole year. It is estimated that adverse balance for the whole year might reach US$ 2 billion. As for industrial production, the first half of the current fiscal year witnessed an output growth of 7.69%, but 13 categories of large-scale industries presented a downslide. The worst case is the sugar refinery industry with a decrease of 30.58%. Other 25 kinds of industrial products have recorded an increase in production. According to statistical data by Pakistan, the industry of Pakistan has registered an overall growth of 6.2% for the first seven months, mainly contributable to the growth in textile and auto industries. Foreign investment decreased. Foreign investment utilization in Pakistan for the first half of the current fiscal year decreased by a large margin by a total of 73% over the same period of the preceding year. According to the most updated data, available, foreign direct investment for the first half-year was US$ 142.1 million, down 53% from the same period of the preceding year (US$ 306 million). Indirect investment decreased by US$ 67.4 million. It is thus clear that although the Pakistan government is trying all out to attract foreign investment, the result is not remarkable.
Construction and evaluation of communication infrastructure system in Pakistan
The public Pakistan Telecommunication Corporation Ltd. (PTCL) plans to increase the number of Internet connected cities from more than 400 currently to 800 within the current fiscal year. It is reported that the company will lay high-capacity optic fiber cable to extend the Internet coverage, and install 450,000 telephone sets for accessing the Internet. In addition, the company plans to improve various supporting telecommunication facilities to promote the services quality for users. The Pakistani telecommunication network has developed to certain extent.
Development status and trend of the communication industry There exists serious monopoly in the development of communication in Pakistan. The basic telephone business has been monopolized by the PTCL before 2002. Pattern and development trend of telecommunication operation market Competition pattern in national telecommunication operation market Postal/Telecommunication services separation and split of regulatory functions Major carrier: Pakistan Telecommunication Corporation Ltd. (PTCL) is a public carrier and 11.85 of its stock shares was sold through listing in 1996. Another 3.1% was sold in 1997. The Pakistan government is implementing the plan of further privatizing PTCL by selling stock shares to its strategic partners. SCO is responsible for the telecommunication operation and services in the northern areas as well as Azad Jamu and Kashmir regions. Three joint venture companies provide mobile cellular communication services. Pakcom (owned by the Millicom of Luxemburg with 59.3% shares and local Arfeen International) provides analog mobile services. Paktel (with Dadong holding 80% shares and local private limited Hasan Ass holding 20%) also provides analog mobile services. Pakistan Mobile Communication (with 66% shares held by Motorola of the USA and local Saifullah-Khan) provides GSM services is Allowable foreign ownership.
Market Analysis of Electronic Information Products
Market scale, developmental features and growth potentials of electronic information products while the consumption of household electrical appliances is at a rising stage in Pakistan, the sources of household electrical products on the market are mainly relying on import. The Pakistan government announced that it will no longer import complete sets of exchanges from foreign countries, and only home made exchanges can access the market in Pakistan. Among the global software industry, Pakistan accounts for less than 3%. Famons brand PCs total only 130,000 all around Pakistan, and PCs with inferior brands total about 55,000. 2.3.2 Analysis on sales volume, structural features and development potentials of electronic information products. The computer hardware market of Pakistan has developed considerably over the recent years. Philips, Intel and Acer have founded their offices in Pakistan. Philips Pakistan Branch stated that the company is considering starting to assemble computer spare parts, especially displays, in Pakistan. From January to June 2001, Acer reported a growth of 135% in sales volume of computers and spare parts in Pakistan. Such a growth rate indicates that there is still tremendous space for growth in the computer market.Intel set up its branch company in Pakistan as early as 1997. The company stated that in the third quarter of 1999 the company hit historical high record of delivery in the total microprocessors, chipsets and quick blink memories. The growth rate in software was 115 for 1996-1997, 18% for 1997-1998, and reached 45% in 2000.
Development of National IT Industry
Pakistan encourages software export while making efforts to enable software export to grow by 300% within next two years. Currently the annual software export of Pakistan is only US$ 30 million. In order to expand software export, the Pakistan government has decided to actively train highly qualified talents with advanced computer software knowledge and give software companies large fund support. In the budget for the new fiscal year, the Pakistan government has increased the budget for science and technology by a factor of 12, and decided to simplify the procedures for foreign computer companies' registration in Pakistan, exempt IT-related companies from administration tax, and determine unified and standard price nationwide. In addition, the government has also decided to establish software technology cooperation zones in big cities such as Islamabad and Karachi, to provide more convenient conditions for both national and international companies. Software piracy is serious phenomenon; the rate of piracy is estimated over 60%. Import rate for software is 35%.
Analysis on IT Application
(1) The IT industry has just gotten off the mark in Pakistan, so to speak. For most Pakistanis, computer is still a new thing. After president Musharraf took office, the development of IT industry has been linked with the future of Pakistan, while information technology has been vigorously promoted and extended all over the country. For a time, computer promotion and application was rapidly outspreading in Pakistan. (2) Some major news media have played a leading role in the popularization of IT in Pakistan. Several newspapers and news agencies have their own websites and special news homepages, most of which are in English and in Urdu. New websites in Pakistan are mostly simple in contents comparatively. Except for some real time news, related special topics and background materials are very few, the quality and quantity of the news are limited, and those who really browse the websites are also very few. When some websites hold teach-ins, it is often the case that there are only scores of voters, many of them being overseas Pakistanis. (3) Information schools are a mixture of the good and the poor. In numerous "information academies", the teaching facilities are very old and outmoded. In such schools, what you learn is mostly computer operation and rarely in-depth computer knowledge. The economic depression and unpopularity of computerized office in Pakistan are the major obstacles to the development of IT.
Characteristics of an Effective Industrialization Policy
The industrial policy framework presents policy recommendations considered essential for industrial development with a focus on improving industrial competitiveness, especially with regard to industrial enterprises be they small, medium or large which are exposed or potentially exposed to international competition (within or outside the country). It is generally acknowledged that the Government cannot fully control industrial development nor can it be involved in direct productive activities. However, the Government, in consultation with the private sector can formulate policies; pursue such policies, and through regular reviews and analysis of industrial trends and performance, make policy adjustments.
The Government through its industrial policy can:
1. Improve the operating environment for private investments (both domestic and foreign) and sustainable industrial development.
2. Encourage new investments, in particular, foreign direct investments;
3. Improve competitiveness and enhance productivity through macro-economic management and industrial governance and by ensuring that the basic physical infrastructure, capital resources, human resources and knowledge resources are adequately developed and are of relevance to industrial development and competitiveness;
4. Direct and promote the diversification of economic activities, in particular, the diversification of industrial production;
5. Minimize major constraints and impediments to industrial development such as, administrative bottlenecks relating to the provision of government services, red tape and time delays, tax administration, commercial laws, labour relations etc.
Industrial Policy Analytical Framework:
An industrial Policy Analytical Framework is Integrated Industrial Policy for Sustainable Industrial Development and Competitiveness, the argument is advanced that an industrial policy should be realistic and functional and should aim at creating an environment that would attract increased investments, thereby, creating more employment and generating incomes. An industrial policy should also address macro-economic conditions and capacity building to transform the industrial landscape of a country. However, given that some of the critical factors or policies that influence industrial development are outside the domain of the
Ministry of Trade and Industry, other ministries and key stakeholders in government and the private sector should be able to buy into the various policy instruments and elements, for effective policy implementation and sustainability. It is also stated therein that the policy should address human resource development and its effective utilization and management, while at the same time promote the effective mobilization of knowledge resources, innovation, product improvements and competitiveness.
Recognizing that a realistic industrial policy should based on pro-active analysis, a comprehensive industrial sector survey focusing, in particular on competitiveness, analysis was undertaken, the results of which have highlighted above. Policy once defined should implement. As indicated earlier, some critical factors or policy instruments are actually the responsibilities of other line ministries and outside the sphere of influence of the Ministry of Trade and Industry. Policy implementation therefore will require other line ministries and institutions to collectively buy into the industrial policy, firstly, by revisiting their respective policy instruments to ensure that they reflect the new policy intensions of the industrial policy. The starting point of the proposed industrial policy framework for Eritrea is the National Economic Policy Framework and Programmed (Macro Policy) whose main objective is to reduce poverty, create wealth and prosperity with social justice through, inter alia, the facilitation of a dynamic private sector-led market economy. The Government of Eritrea has put in place the basic requirements for macroeconomic stability, economic management and governance. The National Economic Policy Framework is multifaceted. However, there are some important aspects that are of relevance to industrial development and competitiveness. These are fiscal policy, monetary policy, financial policy, trade and investment policies and specified sub-sector objectives and strategies, namely agriculture and fisheries, manufacturing, energy and mining, infrastructure, education, training and human capital formation, as well as quality and environment. The aim of this industrial policy framework and proposed action plan is to complement the objectives, strategies and plans inherent in the Macro Policy with selected policy elements and appropriate institutional framework that contribute to revitalizing the industrial sector in Pakistan, improve productivity and industrial competitiveness. Since gaining independence, the Government of the Pakistan has to pursue economic development and poverty reduction through a socio-economic, strategy focusing on the following:
· “Inducing widely shared sustained economic growth by establishing a competitive environment in which efficient export-oriented private firms thrive;
· Raising the skills and well being of people by investing in education, nutrition, healthcare and water and sanitation systems;
· Reducing rural poverty by investing in rural infrastructure, agriculture, management of livestock and pastures and development of fisheries.”
In the present government the emphasis was on developing new export markets, improving corresponding physical resources and infrastructure; pursuing nation-wide privatization of government-owned enterprises; developing a strong financial system, achieving and maintaining macro-economic stability; adopting and enforcing sound investment regulations, reducing bureaucratic red-tape and other unnecessary delays to attract private sector investments and adopting policies and measures that will revitalize agricultural production and increase agricultural productivity. The Government recognizes that in developing the economy and, in particular, building a competitive and vibrant industrial sector, there are major problems and constraints to be addressed, namely, red-tape, time delays and other bureaucratic obstacles, cumbersome fiscal and marketing regimes, labour laws and regulations; inadequate infrastructure, weak institutional capacities and capabilities, inadequate support services, shortage of trained human resource, an industrial culture that is not quite willing to innovate and inadequate capital resources and finance. The Macro Policy and the Poverty Reduction Strategy aim to reduce poverty through wealth creation and the redirection and rational use of scarce resources. In this regard, micro, small and medium enterprises (MSMEs) play a crucial role in the country’s development. Nevertheless, national wealth cannot be created through MSMEs per se. The whole manufacturing sector has to be stimulated with possibilities for linkages within the sector and between the manufacturing sector and other sectors of the economy. The food processing and other agro-based industries, for example, UREA & Cement approximately 60-80% of their raw material input from domestic sources and represent about 40-50% of manufacturing output. The expansion of total food processing and other agro-based industries could therefore trigger a multiplier effect, involving increased agricultural production, increased farm and non-farm employment, increased incomes for the rural poor and those engaged in distribution and other services, thereby reducing poverty. The development of the metallurgical and engineering industries in Pakistan could also result in tremendous backward and forward linkages within the manufacturing sector and between the manufacturing sector and agriculture on the one hand and the manufacturing sector and the transport and communication sector on the other hand.
Essential points of effective industrialization Policy
§ The Effective Industrialization Policy has a fundamental role to play in achieving the accelerated and Shared Growth Initiative of Pakistan’s goals of accelerating GDP growth to over 10 percent by 2010 and to halving unemployment and poverty by 2014 and the further intensification of industrialization towards a knowledge economy beyond 2014.
§ The primary objective of the Effective Industrialization Policy is to set out government’s approach to the industrial development of the Pakistan economy. Consequently the Effective Industrialization Policy sets out a vision for the industrial economy for both the short-medium and medium-long term.
§ It is important to emphasize that the Effective Industrialization Policy is a Framework rather than a blueprint for Pakistan’s industrialization process. Much of the detail of intervention will flow from existing or future processes that are informed by the document. Therefore it does not attempt to address every question related to our industrial development trajectory. Rather it focuses on principles, processes and a set of strategic processes through which structural change will be achieved.
§ Therefore the Effective Industrialization Policy aims to provide strategic direction to the economy with respect to the issue of industrial development. First, it is aimed at providing greater clarity and certainty to the private sector and social partners with respect to investment decisions leading. Second, it is intended to provide a reference point for substantial improvements in intra-governmental coordination of the numerous and complex set of policies and projects that will form part of the Effective Industrialization Policy.
§ The Pakistan economy has achieved steady growth since 1999. It has also experienced important diversification away from the minerals-linked growth path. A range of sectors beyond our historical strength of traditional commodities has experienced good growth such as the tourism, automotive and Textile industries.
§ However, a situational or political instability indicates that the major structural weakness in the industrial economy has been that the losses in employment in traditional commodity sectors of the economy (such as agriculture and mining) have not adequately been offset by rapid enough growth in non-traditional tradable sectors (such as in manufacturing and certain tradable services). These tradable sectors are critical for employment creation because they are generally both labor-intensive and characterized by relatively low-skill intensity.
§ Therefore our conceptualization of industrialization is not restricted to the manufacturing sector but involves a structural change in our growth path towards a more labor-absorbing and value-adding economy. While the Effective Industrialization Policy is aimed at unlocking constraints that will benefit the entire economy, there is a particular emphasis on growing non-traditional tradable goods and services due to their relative intensity in low-skilled labor and potential for value-addition. These sectors include manufactured products outside of mineral processing, services that can compete in export markets as well as against imports, including certain non-traditional agricultural and mining activities.
§ The document then briefly sets out the necessary conditions for industrialization. These conditions underscore the fact that industrial policy does not lie within the narrow domain of a singe government department but requires strong coordination across a range of departments.
§ The Effective Industrialization Policy recognizes that there are virtually no examples of developing countries that have industrialized rapidly without a robust and well-implemented industrial policy. Consequently a ‘one-size-fits-all’ approach to industrialization in favor of identifying and acting upon critical constraints and opportunities at both the cross-cutting and sectoral levels of the industrial economy.
§ Processes of ‘self-discovery’ through which these constraints and opportunities are identified and addressed will be developed and strengthened in conjunction with business and other stakeholders. Cross-cutting and sectoral programs will be developed, strengthened and better prioritized in order to focus limited human and financial resources on a strategic set of Key Action Plans (KAPs) in any given three-year Medium-Term Expenditure Framework (MTEF) period.
§ It sets out some key principles for all government departments with respect to the design and implementation of industrial and sector policies. Such policies should lead to evidence-based KAPs, which are of sufficient scale to achieve structural change in the economy; and are supported through an appropriate mix of regulatory change and industrial financing. Where appropriate, industrial financing will be dispensed on a far more conditional basis, be aimed in particular at new activities, and be made available for a limited time.
§ Incentives should be provided only to “new” activities. The main purpose of industrial policy is to diversify the economy and generate new areas of comparative advantage. It follows that incentives ought to focus on economic activities that are new to the domestic economy. “New” refers to both products that are new to the local economy and to new technologies for producing an existing product. Many countries provide tax incentives for new investments without sufficiently discriminating between investments that expand the range of capabilities of the home economy and those that do not. Note also that this focus differs substantially from the tendency that many incentive programs have to subsidize small and medium sized enterprises (SMEs). SME support policies are based on the criterion of size—not on whether the activity in question has the potential to spawn new areas of specialization. It is the latter that produces economic growth.
§ There should be clear benchmarks/criteria for success and failure. As I have already emphasized, industrial policy is a necessarily experimental process. It is the nature of entrepreneurship that not all investments in new activities will pay off. And not all promotion efforts will be successful. In Korea, Taiwan, and Chile, successes have more than paid for the mistakes. But in the absence of a clear idea of what constitutes success and observable criteria for monitoring it, failures can get entrenched. Recipients of subsidies can game public agencies and continue to receive support despite poor outcomes. Bureaucrats administering incentives can claim success and keep their programs running. Ideally, the criteria for success should depend on productivity—both its rate of increase and its absolute level—and not on employment or output. While productivity can be notoriously difficult to measure, project audits by business and technical consultants can provide useful indications. So can benchmarking, using the experience of similar industries in neighboring countries. Performance in international markets (i.e., export levels) is also a good indicator, as it provides a quick-and-dirty way of gauging how the industry is doing relative to world-class competitors.
§ There must be a built-in sunset clause. One way to ensure that resources (both financial and human) do not remain tied up for a long time in activities that are not paying off is to phase out support by default. Hence, every publicly supported project needs to have not only a clear statement ex ante of what constitutes success and failure, but also an automatic sunset clause for withdrawing support after an appropriate amount of time has elapsed.
§ Public support must target activities, not sectors. It is common for investment promotion agencies to specify their priorities in terms of sectors or industries—e.g., tourism, call centers, or biotech. This leads to the misdirection of industrial promotion efforts. The targets of public support should be viewed not as sectors but as activities. This facilitates structuring the support as a corrective to specific market failures instead of generic support for this or that sector. Rather than providing investment incentives, say, for tourism or call centers, government programs should subsidize bilingual training, feasibility reports for nontraditional agriculture, infrastructure investment, adaptation of foreign technology to local conditions, risk and venture capital, and so on. Cross-cutting programs such as these have the advantage that they span several sectors at once and are targeted at market failures directly.
§ Activities that are subsidized must have the clear potential of providing spillovers and demonstration effects. There is no reason to provide public support to an activity unless that activity has the potential to crowd in other, complementary investments or generate informational or technological spillovers. Public support must be contingent on an analysis of this sort. Moreover, activities that are supported should be structured in such a way to maximize the spillovers to subsequent entrants and rivals.
§ The authority for carrying out industrial policies must be vested in agencies with demonstrated competence. It is common to complain about incompetence and corruption in government bureaucracies. But bureaucratic competence varies greatly among different agencies within the same country, and most countries have some pockets of bureaucratic competence. It is preferable to lodge promotion activities in such agencies instead of creating new agencies from scratch or using existing ones with poor track records. This will have an implication about the tools of industrial policy that can be used. If the development bank is in good shape but tax administration is a mess, promotion may need to be done through directed credit rather than tax incentives. Note how this may conflict with the requirement that policy tools be targeted as closely as possible to the source of a market failure. The location of competence may predetermine the tools used. But this is a necessary compromise: when administrative and human resources are scare, it is better to employ second-best instrument effectively than to use first-best instruments badly.
§ The implementing agencies must be monitored closely by a principal with a clear stake in the outcomes and who has political authority at the highest level. As we have seen, effective industrial policy requires a certain degree of autonomy for the bureaucratic agencies implementing it. But autonomy does not and should not mean lack of accountability. Close monitoring (and coordination) of the promotion activities by a cabinet-level politician, a “principal” who has internalized the agenda of economic restructuring and shoulders the main responsibility for it, is essential. Such monitoring guards not only against self-interested behavior on the part of the agencies, but also helps protect the agencies from capture by private interests. As suggested above, this principal could be a cabinet-level minister, a vice-president, or even the president (or prime minister) himself.
§ The agencies carrying out promotion must maintain channels of communication with the private sector. Autonomy and insulation do not mean that bureaucrats must maintain arms’ length relationships with entrepreneurs and investors. In fact, ongoing contacts and communication are important so as to allow public officials to have a good information base on business realities, without which sound decision making would be impossible.
§ Optimally, mistakes that result in “picking the losers” will occur. Public strategies of the sort advocated here are often derided because they may lead to picking the losers rather than the winners. It is important of course to build safeguards against this, as outlined above. But an optimal strategy of discovering the productive potential of a country will necessarily entail some mistakes of this type. Some promoted activities will fail. The objective should be not to minimize the chances that mistakes will occur, which would result in no self-discovery at all, but to minimize the costs of the mistakes when they do occur. If governments make no mistakes, it only means that they are not trying hard enough.
§ Promotion activities need to have the capacity to renew them, so that the cycle of discovery becomes an ongoing one. Just as there is no single blueprint for undertaking promotion, the needs and circumstances of productive discovery are likely to change over time. This requires that the agencies carrying out these policies have the capacity to reinvent and refashion themselves. Over time, some of the key tasks of industrial policy will have to be phased out while new ones are taken on.
Industrial Labor policy of Pakistan
The purpose of this Labor Policy 2005 is to contribute to the economic and social progress of the nation by ensuring that workers’ rights are protected, working conditions are fair, and that enterprise efficiency and competitiveness is encouraged. There is a clear linkage between development and labour protection. A properly protected workforce is more motivated, more committed, and more productive, resulting in benefits for workers, enterprises, and the nation as a whole.
It is stressed that this Labour Protection Policy 2005 is not an instrument of social policy alone but, rather, and instrument of both social and economic policy. There is little doubt that effective labour protection bestows economic benefits on enterprises, workers and the nation as a whole, through increases in labour productivity. Within an enterprise the costs of labour protection are far outweighed by the economic benefits: in short, good labour protection is good business.
Within this broad purpose, the Labor Protection Policy 2005, once implemented, will contribute to the achievement of the following objectives.
• The Policy will contribute to increased protection for workers and improve their working conditions, leading to increased motivation.
• The Policy, progressively, will extend protection and improvements not only to workers operating under formal contracts of employment, but also some aspects of protection to self-employed persons, agricultural workers, informal economy workers, contract workers, seasonal workers, and home workers.
• The Policy will contribute to labour productivity enhancement within enterprises through improved working conditions and a safer and healthier working environment.
• The Policy will assist enterprises to become more efficient and competitive. Even if wages increase, unit labour costs will fall if measures are taken to increase labour productivity.
• The Policy will also have an important demonstration effect by alerting employers, workers, potential investors, and the international community that the Government of Pakistan together with its social partners is committed to improving labour protection as a key strategy in national development.
The achievement of these objectives is dependent, of course, on the extent to which the policy objectives are translated into specific action strategies. Some of these strategies will focus on awareness raising, education and training, others will be legislative in nature, requiring that laws be amended and that mechanisms are in place to ensure compliance with laws and regulations. All strategies will require a major effort in information transfer to ensure that workers and employers are aware of their rights and obligations in the world of work.
This policy document encompasses eight elements, as follows.
• Basic rights
• Working conditions
• Working environment
• Social security
• Living conditions
• Compliance and enforcement
• Capacity building for labour administration and the social partners.
The very foundation of labour protection in Pakistan rests on respect for workers’ rights as embodied in the nation’s Constitution and the ILO’s standards, as set out in its Declaration on Fundamental Principles and Rights at Work, as outlined in the Introduction to this policy document.
Freedom of association and the right to bargain collectively
The Government reaffirms its commitment to these fundamental principles, as indicated in Labour Policy 2002, and also reaffirms the importance of wide-ranging tripartite dialogue at all levels. The Government supports the development of bilateral interactions between workers and employers at national, sectoral, industry and enterprise levels. Without in anyway diminishing the authority and influence of national and provincial employers’ and workers’ organizations, the government supports and encourages the development of new initiatives and approaches to worker-management relations at enterprise level. It is enterprises that employ workers, pay wages, and produce goods and services, and usually it is in enterprises that disagreements and conflicts begin. Accordingly, enterprises, through bilateral interactions, should play the leading role in handling complaints, resolving conflict, and building harmonious relations between workers and management. Related to the encouragement of positive enterprise level bilateral interactions, the government reaffirms its commitment to the right to organize and bargain at this level. The right to organize is a matter for workers to address but, unless there is a commitment from employers to allow workers to organize and actually bargain, means relatively little. The government urges employers and their organizations and workers and their trade unions to respect and benefit from these basic rights at enterprise level.
Enterprises are encouraged to develop and improve worker-management relations through the introduction of various workplace cooperation initiatives including improved one and two-way communication, the establishment of workers’ committees to bring problems to the attention of management, the introduction of a grievance procedure, and the establishment of joint consultative and joint-decision making bodies. Such arrangements are seen as complementary to, and not a substitute for, collective bargaining and must not be used as a means to restrict in any way the rights of workers to freely associate.
Workplace cooperation can benefit from a supportive legal environment but, in practice, its success depends on the commitment and willingness of the parties to cooperate, as well as their ability to do so.
Improved workplace cooperation can
• prevent disputes by resolving complaints and preventing them from escalating into larger disputes,
• resolve problems quickly by addressing complaints when they arise,
• improve working conditions and the working environment,
• increase labour productivity and improve the competitiveness of the enterprise,
• build trust and confidence between workers and managers,
• improve decision making at all levels,
• promote common interests,
• increase motivation through participation and involvement. Although workplace cooperation is essentially a bi-partite process, government is ready to play its due role in helping enterprises to ‘get started’. This requires that some officers acquire the knowledge and skills necessary to facilitate and assist managers and workers at enterprise level to adopt new approaches to their interactions. Consideration will be given to Federal conciliators being retrained to assume such responsibilities, to enable them to respond to requests from enterprises for assistance to improve cooperation, prevent conflict and disputes, and generally take on a number of ‘preventive conciliation’ tasks.
Workplace cooperation is not an end in itself. It is a means to improve enterprise performance in all dimensions, resulting in a more motivated and productive workforce and a more competitive and profitable enterprise.
The key to improved cooperation in enterprises is improved communication in all its forms, a commitment to sharing information, and a willingness on the part of management to see its workers as partners in production.
Forced and compulsory labour
The Government’s position on forced and compulsory labour is set out in the document titled National Policy and Plan of Action for the Abolition of Bonded Labour and Rehabilitation of Freed Bonded Labourers, 2001.
This document states the Government’s policy in the following terms.
‘Bonded and forced labour in all forms is prohibited under the Constitution and the relevant laws in force in the country. The Government is committed to eliminate the bonded and forced labour practices wherever these exist in the society. It pledges to adhere to all international instruments, covenants, conventions and protocols whether ratified or not which protect fundamental human rights.
The Government commits to endeavor to eliminate bonded labour through concerted efforts aimed at the transformation of traditional socio-economic structure and poverty reduction, and by putting in place a comprehensive action plan through an integrated and coordinated approach for the eradication and rehabilitation of workers in bondage.’
The policy statement is supported by an action strategy that establishes a National Committee for the Abolition and Rehabilitation of Bonded Labor, with responsibility for reviewing the implementation of the law and the action plan relating to the abolition and rehabilitation of bonded labour, monitoring the work of District Vigilance Committees, and addressing the concerns of national and international bodies on bonded and forced labour.
The Action Plan focuses on providing relief packages for freed bonded labourers, awareness raising, the active involvement of the social partners, the provision of counseling and legal services to needy bonded workers, organizing vocational training programs for freed bonded workers, and the provision of micro credit to assist in self-employment creation.
The Government has ratified the two key ILO Conventions on forced labour (Conventions 29 and 105) and the National Policy on this matter clearly stablishes the intentions and commitment of Government to implement in full the articles contained in these conventions.
Equality and Non-Discrimination
The Government reaffirms the need to eliminate gender discrimination as stated in Labour Policy 2002. The Government is committed to improving the role of women in the labour force, providing women with equal opportunities for employment, and making workplaces more conducive for women workers. The Government is also aware of the need to develop a conducive environment to support greater participation of women in the work force, and will pursue this in consultation with the Ministry of Women Development and the National Tripartite Labor Conference.
The Government is committed to the implementation of ILO Conventions on Equal Remuneration and Discrimination (Employment and Occupation), respectively. Gender equality with regard to pay and wage systems will be a key component of the new policy in the field of wages, as outlined in the policy element concerned with Working Conditions.
The protection of child workers is the subject of a separate policy of the Ministry of Labour, Manpower and Overseas Pakistanis, titled National Policy and Action Plan to Combat Child Labor, May 2002.
This policy supports the progressive elimination of the different forms of child labour, the monitoring and evaluation of child labour through Provincial Labour and Manpower Departments (including law enforcement, establishment of monitoring bodies, and national and industry surveys to assess progress), and the immediate withdrawal of children from hazardous and exploitative situations, and their rehabilitation through specially designed education and training schemes.
Since the launch of the national Policy and Action Plan to Combat Child Labor, Pakistan in October 2001 ratified ILO Convention 182 on the Worst Forms of Child Labor, 1999. This ratification, together with the increasing demands from international buyers and consumers that Pakistan’s products be ‘child labor free’, provides the opportunity and incentive for the Government to take further action in its efforts to combat child labour.
Accordingly, after a short grace period, the Government will abolish all child labour for children under the age of 14 years in an employer-employee relation, and will impose significant penalties on offending employers in all sectors and all locations. Although some work is permitted for children between the ages of 14-18 years under the ILO Convention on the Worst Forms of Child Labour, the Government is committed to ensuring that work performed by children in this age group is strictly in accordance with the provisions of the Convention. Thus the employment of children under conditions of slavery, work related to illicit activities or work likely to harm the health, safety or morals of children, is prohibited.
Laws will be amended to support these policy announcements, and financial penalties and other sanctions applied against employers who fail to comply. Although difficulties in enforcing laws will always apply, this is no reason to avoid amending the law. Without laws no legal enforcement is possible, and although obstacles to effective enforcement can be expected the law itself sends important signals.
The Ministry of Labour, Manpower and Overseas Pakistanis proposes that labour inspection services under the responsibility of Provincial Labour and Manpower Departments be restructured, reorganized and revitalized to ensure better compliance with child labour laws and, indeed, all laws and regulations on labour matters. The new approach to labour inspection, enforcement and compliance arrangements are addressed in the Ministry’s document titled
Labour Inspection Policy 2006.
With a view to ‘getting started’ on these new policy pronouncements, all persons under the age of 18 years will be removed from the country’s mines, tanneries and brick kilns by the end of 2006, and placed in appropriate schools and training institutions or, alternatively, in forms of employment that are permitted by law.
The total ban on the employment of children under 14 years will require a concerted effort to ensure that such children are placed in schools and continue their education in the mainstream system. This will require close cooperation with the Ministry of Education and the Provincial Education Departments.
The promotion of basic rights and their application for the benefit of all parties requires an awareness and understanding of the nature and scope of those rights, and their related obligations. The Government is committed to raising awareness levels on basic rights and seeks the cooperation of workers’ and employers’ organizations in the development and implementation of appropriate awareness programs through appropriate institutional arrangements at both federal and provincial levels.
Traditionally, labour protection in Pakistan has focused on protection for workers engaged under formal contracts of employment in both public and private sectors. Protection for such workers must be maintained and improved, but the Government is committed to extending labour protection to workers employed under non-traditional arrangements including self-employed persons, workers engaged in the informal economy, home workers, contract workers, seasonal workers, and workers in the agricultural and fishing sectors.
Workers in the informal economy experience various difficulties and deficits including
• unproductive and poor quality jobs, with low productivity, and low pay,
• limited or no protection in relation to working conditions (hours of work, leave), and the working environment (including a lack of safety, exposure to hazards, and unhealthy workplaces),
• no social protection including old age pensions, health insurance, unemployment benefits, work injuries and illness),
• No representative organizations and no voice on work related matters.
The Government is committed to addressing these problems and over time aims to ensure that all employees, whether worker or manager, in all sectors, and all persons engaged in self-employment and informal economy activities, enjoy all aspects of labour protection, as defined from time to time. This may take many years to achieve but is an ideal to strive for and to which all parties are urged to commit.
Labour protection for persons working outside formal employment arrangements will be assisted through the introduction of labour extension services, particularly concerning improved safety and health at work, and for some aspects of social protection. Such interventions will concentrate on education, information and advice, as compared with the application and enforcement of laws typically found under traditional approaches to labour inspection. Minimum wages, however, is one area where assistance to informal economy workers will be supported by legislation. It is proposed that minimum wages, whether at hourly, daily, weekly or monthly rates, apply progressively to all sectors and situations in which paid work is done under employer-employee arrangements
There are many different categories of workers to be covered by a Labour Protection Policy.
Workers under formal contracts of employment
Workers under these arrangements in both public and private sectors will receive increased protection, particularly concerning work safety and health, and improved compliance with existing laws and regulations. Improved arrangements for written contracts of employment, minimum wages and social security will also benefit workers in this category. Formal economy workers will also benefit by the requirement that contractors and service providers be registered to place them under the same obligations as other employers. All workers in situations where an employer-employee relation is evident will have a written contract stipulating the duration and terms of employment, and that commits the employer to pay the appropriate minimum wage.
Workers will also benefit by the formulation and application of a universal definition of worker.
Although there is no provision under existing law for fixed-term contract employment, employers increasingly seek to engage workers on this basis to provide the flexibility they seek in the operation of their enterprises. The government accepts the need for contract labour of fixed term duration in support of labour market flexibility but, at the same time, seeks to ensure that workers engaged on a short-term contract basis are protected, particularly concerning social security and minimum wages, and that contract employment is not used to deny workers the benefit of permanent status. Accordingly, the government proposes to promote tripartite discussions on the issue of contract employment, with a view to finding an appropriate balance between labour market flexibility in the interest of employers, and labour protection in the interest of workers.
Contract workers will benefit by having written contracts of employment and by employers being prevented from engaging workers on a series of short-term contracts as a way of denying such workers permanent status and the related benefits that permanency provides.
Workers in micro, family, and small and medium sized enterprises
Workers and entrepreneurs in micro and family enterprises operating in the informal economy will benefit from increased knowledge of safety and health issues, and increased access to social security on a voluntary basis. Workers in small and medium sized enterprises operating within the formal economy will benefit from improved working conditions, safer and healthier work environments, minimum wage payments, social security coverage, and higher labour productivity.
Self-employed non-agricultural workers in both urban and rural areas
Such workers will benefit from improved work safety and health and by gaining access on a voluntary basis to social security schemes.
Informal economy workers
Extending labour protection to the country’s large and diverse informal economy is a major challenge. The informal economy supports millions of people across a large geographic area, undertaking a wide variety of low-pay, low-productivity jobs, under working conditions that are frequently harsh, unhealthy, and hazardous. Informal economy workers are not covered by labour laws but it is necessary for the labour administration to take the initiative to see how it can best reach out to such workers and provide them with basic protection through the provision of advisory services, based on a ‘labour extension’ approach.
Workers in the informal economy, including home workers and domestic workers, will benefit from improved safety and health arrangements, access to some social security arrangements, and the payment of minimum wages where an employer-employee relation is evident. The employment of children under 14 years will be eliminated, and the employment of those between the ages of 14 and less than 18 years will be strictly controlled, through a combination of stronger legislation and the introduction of labour extension services.
It is proposed, in the first instance, that a pilot project be planned and implemented on a small scale in one or two districts of a selected province to assess the feasibility of this ‘labour extension approach’. The project will be closely monitored in accordance with clearly defined objectives and performance indicators and, if successful, steps taken to replicate its successes in other districts and provinces.
Women workers will benefit from the application of ILO Convention on Equal Remuneration, 1951 (No. 100), ratified by Pakistan in 2001. Minimum and above-minimum wages will be paid on the basis of equal pay for equal work, and equal pay for work of equal value, as between men and women, in accordance with Pakistan’s obligations under ILO Conventions 100 and 111 concerned with equality and non-discrimination, respectively.
Women will also benefit from better information concerning their working conditions and arrangements in the informal economy, from improved maternity arrangements, codes of conduct relating to sexual harassment and, where possible, day care arrangements for their children.
The Government is committed to providing women with equal opportunities for employment and will re-examine existing legislation to ensure that women are not denied access to suitable jobs that are arising due to Pakistan’s changing labour markets.
Workers between the ages of 14 and less than 18 years will benefit by being excluded from hazardous working conditions and other working environments that adversely affect their physical and moral development. They will also benefit from greater access to education and training, particularly training tailored to identified labour market needs.
Children and young persons will also benefit from targeted attention to work of a hazardous nature as, for example, in such industries as mining, tanneries, brick kilns, construction, and glass bangles, and from attention to the situation of young domestic workers employed in private households.
Young persons will benefit also from minimum wage payments.
Corporate agricultural workers will benefit from the application of minimum wages to all situations in which a contract of employment is evident, even for limited periods. It is apparent, however, that for the foreseeable future the majority of agricultural workers will operate within the informal economy. They will benefit from increased information on work safety and health as applied to the agricultural sector, and eligibility for some social security services.
Persons engaged in the fishing industry will benefit from clarification as to whether they are contract workers under a contract of employment, self-employed contractors, or members of cooperatives. Where they are engaged under a contract of employment they will benefit from minimum wages, social security benefits, and improved safety and health in their workplace.
The majority of workers in Pakistan’s mining industry are employed on a contract basis, often through a somewhat complicated system of sub-contracting making it difficult to identify the actual employer. Mine workers are covered by special legislation that place them outside mainstream labour legislation.
Mine workers, whether contract or permanent, will benefit by ensuring they receive the same protection as other workers. They will benefit from minimum wage payments, access to social security and improved safety and health in their workplaces.
Seasonal workers will benefit from more flexible access to age pensions and by the application of minimum wages where there is a contract of employment.
The National Policy for Persons with Disabilities 2002 envisages by 2025 ‘an environment that allows for the realization of the potential of persons with disabilities through their inclusive mainstreaming, and providing them the full support of the government, private sector and civil society.’
The Policy Document refers to the need for disabled persons to have equal opportunities and access to employment (and other community services) without discrimination, and to the need to ensure that legislation relating to the employment and rehabilitation of persons with disabilities is ‘adequately formulated and strictly enforced.’
The Government is of the view that the best form of assistance and protection for many disabled persons is productive employment, either in the form of suitable, regular wage employment, or through self-employment. Currently, wage employment is encouraged through special quotas for disabled persons but protection issues, particularly those relating to discrimination, possible harassment, accessibility to work places, and safety considerations, may still arise. Accordingly, in cooperation with other agencies, it is proposed to conduct a study to assess the current status of protection for disabled workers, with a view to ensuring that the protection under labour legislation is being applied. At the same time, it is proposed to review the existing ‘quota and sanctions’ arrangements to determine whether they are achieving their objective of placing more disabled persons into productive employment.
It is apparent that the issue of labour protection is complicated by different legislation applying to different categories of workers, and the fact that there is no legislation at all for some workers.
It is proposed to address this issue by adopting a uniform definition of worker irrespective of sector or place of employment to ensure that all workers where an employer-employee relation is evident have a letter of appointment/contract of employment, that all are protected by the same minimum standards, and that all come under the provisions of the labour code.
This issue has significant implications for the review and consolidation of the nation’s labour legislation.
For many workers, working conditions represent the very essence of labour protection. Three aspects are of particular importance, namely, wages, hours of work, and leave and rest periods.
The Government is committed to the continuation of a system of minimum wages as a fundamental element of labour protection, and proposes to continue with existing tripartite minimum wage determination arrangements. It considers, however, that an independent National Wage Commission is required and proposes to establish a working group to make detailed recommendations on the purpose, specific functions and operational arrangements for such a Commission, including its technical and secretarial support requirements and its relations with provincial wage fixing authorities.
The deliberations of the working group will involve close cooperation with employers’ and workers’ organizations, and will result in the preparation of a detailed policy paper for the development and implementation of national wage policy, including minimum wages, in the medium to longer term.
The terms of reference for the National Wage Commission Working Group will be prepared on the following lines.
• Advise on the purpose and functions of the National Wage Commission, indicating the scope of its operations on minimum wages and other wage issues.
• Advise on the composition of the Commission consistent with its independent status and need for operational effectiveness, and indicate the qualifications and experience expected of commission members.
• Outline the operational arrangements for the Commission including the frequency of hearings, the degree of formality in its procedures and operations, its relations with employer and worker representatives, its relations with government, and the nature and form of public submissions relating to wage issues.
• Outline an operational framework for relations between the Commission and provincial minimum Wages Boards.
• Indicate the staff and support resource requirements for the effective and efficient operation of the Commission, including job descriptions and position profiles for technical staff.
• Outline the information requirements for the effective operation of the Commission and the linkages with other agencies and organizations required to ensure that information relating to its decision making processes is reliable and as recent as possible.
• With regard to national minimum wage determination in particular, advise on
• criteria to be followed in setting the minimum wage with reference to such factors as cost of living, productivity, capacity to pay, social security benefits and other factors as appropriate,
• coverage of minimum wages with reference to persons covered, including the particular situation of apprentices, trainees and young persons, and equality of treatment between men and women,
• frequency and timing of minimum wage reviews and determinations,
• the need to set minimum wages on an hourly, daily, weekly or monthly basis,
• the need to set different minimums for different provinces, industries, and occupation groups.
• Advise on the Commission’s role and functions concerning above-minimum and other wage related issues including such matters as wage adjustments in relation to total productivity improvement, skill levels, hazardous work, wage systems at enterprise level, piece work pay, performance related pay, and other wage issues.
The minimum wage is a time-related wage that, ideally, is reviewed (but not necessarily adjusted) annually based on criteria to be decided by Government but which include changes in the cost of living, increases in labour productivity, the ability of enterprises to absorb additional costs based on the economic environment and competitive situation they face, and changes in social security benefits for workers.
The operation of a minimum wage system does not preclude the operation of piece work payment systems, provided the wages paid under such a system do not result in pay levels below the national minimum.
Hours of Work
The Government is committed to providing workers with reasonable hours of work, which must not exceed 48 hours per week. Workers must be provided with at least one day off in each seven-day period. In accordance with the principle of bilateralism, workers and employers are encouraged to consult and negotiate arrangements that improve on these basic standards.
Overtime work is a key issue for many enterprises, due to tight deadlines imposed by buyers, and the need to accommodate rush orders. This need must be balanced against the right of workers to choose whether or not they wish to work overtime (unless some mandatory arrangements for overtime have been included in a legally binding collective agreement), and their right to receive premium rates for overtime hours worked.
Overtime hours should not normally exceed 12 hours per week, must always be voluntary (unless included in a collective agreement), and paid at premium rates prescribed by law or in a collective agreement.
Leave and Rest Periods
Protection in the form of annual leave, sick leave, and special leave will be determined by law. Under the principle of bilateralism, however, workers and managers at enterprise level, and industry level as appropriate, are encouraged to consult and negotiate on these issues with a view to providing better arrangement for workers than those prescribed by law – arrangements that strike a suitable balance between the production needs of the enterprise and the protection needs of workers.
In addition to protection relating to wages, hours of work, and leave, three additional aspects of working conditions must be addressed, namely, maternity benefits and leave, sexual harassment, and termination due to privatization or unexpected closure.
Entitlements to maternity leave are prescribed by law, but two issues require reinforcement. The Government is of the view that the payment of wage equivalents during the period of leave should remain the responsibility of the social security system, and not the responsibility of the individual employer. The responsibility of the employer is to meet the leave period entitlements, and to keep the job open for the returning worker on completion of the maternity leave period.
Maternity benefits for women who are not covered by social security will have their benefits paid by the employer. Employers are responsible for providing nursing facilities for working mothers after their return to work.
Insufficient is known about the nature and scope of sexual harassment in Pakistan’s workplaces but, based on the experience of other countries, it is assumed that various forms of unwanted and unwelcome behavior of a sexual nature are likely to exist in some enterprises. In the first instance, the Government proposes to assess the nature and extent of sexual harassment in the workplace, examine existing codes, including that prepared by the Alliance Against Sexual Harassment, and prepare a consolidated and updated Code of Conduct to guide the actions of enterprises. This will be prepared in close consultation with employers’ and workers’ organizations, and other informed and concerned parties, particularly the Ministry of Women Development, resulting in a model Code of Conduct that enterprises would be willing to endorse. Codes of Conduct, by their nature, are not legally binding but this is considered a preferable arrangement in the first instance, as compared with the introduction of legislation and its related interpretation and enforcement difficulties.
Violence in the work place, whether sexually oriented or not, is another issue that deserves discussion and deliberation and appropriate legal intervention.
Termination of employment
The progressive privatization of State enterprises inevitably involves ‘right-sizing’ of the work force which, in reality, means ‘down sizing’ and job loss. Increased international competition and its requirement for re-structuring will also lead to private sector job losses.
The Government accepts the right of employers to reduce the size of their workforce in the interest of efficiency and competitiveness but, at the same time, expects that this be done in a systematic matter, based on the principles of fairness and consultation.
Enterprises planning to terminate workers should give as much advance warning as possible to workers, look to alternatives to termination (e.g. retraining), agree on termination procedures (e.g. volunteers first, followed by last-in first-out arrangements), negotiate termination packages, and assist workers to find suitable alternative employment by providing counseling and placement services or, alternatively, linking with government agencies able to provide such services.
Termination arrangements provide an opportunity for employers and workers, and their respective organizations, to demonstrate the maturity required for effective bilateralism in industrial relations. The Government encourages workers and management at enterprise level to consult, discuss and negotiate termination packages that provide adequate protection for workers against job loss. This could be based on voluntary codes of conduct, or on special framework legislation subject to compliance and enforcement arrangements in the hands of labour inspectors.
The Government, in consultation with employers’ and workers’ organizations, proposes to prepare a separate policy paper on labour market flexibility, commencing with a review of existing arrangements considered as obstacles to flexibility, and which impact negatively on enterprise efficiency and competitiveness.
Labour protection in relation to the working environment embraces three main areas, namely, work safety and prevention of accidents, occupational health, and the impact of enterprise work processes and practices on the wider environment. Prime responsibility in all three areas rests with the employer, but with workers required to cooperate to the fullest extent to enable employers to meet their obligations.
The improvement of safety and health in the workplace requires the development of a ‘safety and health culture’ for the enterprise as a whole, based on a wider culture of safety and health in society at large – at home, in schools, in public places, and on the roads.
Employers have a responsibility to ensure that hazards in the workplace are eliminated, minimized, or controlled in such a way that work accidents are avoided. The Government is of the view that the provision of protective clothing and equipment to workers, although important, must not be used as a substitute for hazard elimination and reduction. At the same time, workers have a responsibility to fully cooperate with employers in creating and maintaining safe and healthy workplaces and must make every effort to participate in safety and health awareness and training activities.
Enterprises of all sizes and in all sectors must be encouraged to develop a safety and health culture and introduce policies and rules to ensure that intention is transformed into practice. The development of such a culture and related rules can be applied, albeit informally, to micro and small enterprises, and more formally to those of medium and large size.
Occupational health interventions are concerned with the elimination and reduction of hazards that result in illness and diseases. As before, prime responsibility rests with the employer to make the workplace free from hazards impacting on the health of workers. This requires attention to temperature and humidity, ventilation, noise, dust, illumination, chemical usage and storage, and any other factors impinging on the health of workers and likely to cause short or long-term illness.
Enterprises are encouraged to have an occupational health policy and rules (usually combined with a safety policy and rules) and to train managers and workers to ensure that such rules are applied at all times.
In practice, work safety and occupational health should not be regarded as totally separate issues in that some hazards can cause both accidents and occupational diseases. They are closely related and, as indicated below, both areas should be addressed in an integrated safety and health policy, as should the issue of HIV/Aids in the workplace.
The wider environment
Enterprises have an obligation to ensure that their work processes and disposal of waste products do not impact negatively on the wider environment. This extends beyond the traditional boundaries of labour protection and falls outside the mandate of the Ministry of Labour, Manpower and Overseas Pakistanis. Clearly, however, the environmental pollution created by some enterprises has an impact on all workers in the concerned area, affecting both their working lives and living conditions.
ILO Convention 155
With a view to leading the way in the improvement of work safety and health in enterprises, the Government proposes to take the necessary steps to ratify ILO Convention No.155 on Occupational Safety and Health. This convention establishes the basic framework for Pakistan to address safety and health issues at national, industry and enterprise levels, and its ratification will provide the basis for the development of policies, laws, and implementation arrangements to improve the nation’s overall performance in the area of work safety and health. ILO technical assistance will be requested to assist in the implementation of this convention, once ratified, drawing as appropriate on its expertise in the management of occupational safety and health systems.
Small and Medium Enterprises
Of particular concern is the situation of small and medium scale enterprises and informal sector workplaces that are frequently characterized by hazardous working environments. The proposed Labour Inspection Policy 2006 will address this issue through a labour extension approach, designed to ensure that basic safety and health information and advice is made available to, and acted upon by, informal economy workplaces and small and medium scale enterprises.
Safety and Health Policy
The Government will require that all enterprises over a certain size (yet to be determined) have a written safety and health policy that has been discussed and communicated to workers, and supported by practical rules to ensure that the policy is applied in practice. Such a policy document is a statement of intent and no more than an indication of preliminary commitment on the part of enterprises, but it is an important starting point.
Provincial Directorates of Labour and Manpower will be encouraged to assist enterprises in preparing such policy statements, based on the circumstances applying in individual enterprises and industries with a view to minimizing work hazards, preventing accidents, and promoting safe and healthy work processes and practices.
Safety and health policy statements will stress a commitment on behalf of enterprises to
• eliminate hazards wherever possible,
• isolate hazards from workers if elimination is not possible,
• isolate workers from hazards if elimination is not possible,
• encourage an environment that is free from HIV/Aids,
• provide workers with protective clothing and equipment if hazards cannot be isolated or eliminated,
• report work accidents and diseases,
• share information on safety and health with workers,
• discuss and consult with workers on safety and health issues,
• train workers on safety and health,
• develop and maintain an ‘organization culture’ in which safety and health figures prominently,
• improve, where reasonably practicable, on the minimum standards of safety and health provided under Pakistan legislation.
Occupational Safety and Health Council
The Government in consultation with other Ministries and agencies as appropriate, proposes to establish a National Occupational Safety and Health Council to advise government on a wide range of policy and legislative matters concerning work safety and health. The purpose, functions, institutional and operational arrangements, finances, and membership of the Council, will be the subject of consultations between government, workers’ organizations and employers and their organizations.
Occupational Safety and Health Institutes
In addition, the Government proposes the establishment of provincial Occupational Safety and Health Institutes, to provide a range of technical, information, training, research, and testing services. The National Occupational Safety and Health Council, although not having any control over the activities of the Provincial Institutes will play an important role as an information clearing house on safety and health matters by maintaining close contact with them and by membership on their Boards of Directors. It is suggested that two such provincial institutes could serve the nation’s needs in the first instance but, essentially, this is a matter for provincial governments to decide.
Labour protection also includes aspects of social security involving protection to workers/employees against economic and social distress that flow from a stoppage or substantial reduction in earnings. This ‘distress’, as applied to workplaces, can take the form of sickness and medical expenses, unemployment, old age, employment injury or work related disease, and maternity leave. Accordingly, social security benefits that offer protection to workers encompass medical care, sickness benefits, unemployment benefits, old age pensions, benefits for employment injury or occupational disease, and maternity benefits.
Social Protection Study
In May, 2003 the Ministry commenced a study to guide the Government in the preparation of a comprehensive plan for social protection development, as well as a feasibility study for health insurance.
The final outcome of this study will have important implication for workers, employers, and the organization and structure of social security institutions. The study calls for a new consensus between government, employers and workers on social security matters, and some rationalization of social security institutions to reduce duplication and improve accountability. It is also expected to address aspects of inspection related to social security contributions, with a view to such functions being included in an integrated inspection system.
The study will result in the preparation of a separate Social Protection Policy and thus this labour protection policy does not address in detail social security issues. Two issues, however, namely, the Employees’ Old Age Benefits Scheme, already in operation, and unemployment insurance, yet to be seriously discussed, deserve consideration.
Employees’ Old Age Benefits
This scheme applies to formal sector enterprises with more than five employees and is funded by contributions from both employers and employees, with almost 90% of the contribution coming from employers. The scheme does not cover workers from the agricultural sector, the mining sector, the informal economy, or those employed in enterprises with fewer than 5 employees (although it is possible for such enterprises to join on a voluntary basis.) Overall, less than 3% of the total employed labour force is covered by the scheme.
The Government is committed to ensuring that workers legally entitled to old age benefit coverage are, in fact participating in the scheme. It is also committed to extending the coverage of the scheme to self-employed persons, informal economy workers, and the agricultural sector, on a voluntary basis, and looks to the Social Protection Policy to provide guidance on this matter.
The social protection study will not address the issue of unemployment insurance and unemployment benefits and, indeed, the Government considers that any development of such a scheme is essentially a long-term consideration. It is clear, however, that an unemployment benefits scheme would have considerable appeal to both employers and workers, and the Government proposes to establish a working group to commence discussions on the feasibility of introducing such a scheme at some future date.
This working group would consider such issues as the funding of such as scheme, eligibility for benefits, the administrative arrangements for the collection and payment of contributions, the linkage between unemployment benefits and employment services, and a wide range of related issues to enable government to better understand the nature and operation of unemployment benefit schemes as a prelude to future policy development. It is stressed that Government interest in this field is purely exploratory at this stage, and there is no commitment, to the introduction of such a scheme in Pakistan in the immediate future.
An additional component of labor protection relates to the enhancement of the productive efforts of workers through improved living conditions including improved housing, better sanitation, domestic hygiene, nutrition, and disease prevention (including prevention from HIV.)
Such issues have a significant bearing on the overall health and well-being of workers, and thus influence their productivity. Accordingly, the Government is of the view that the linkage between living conditions and the world of work is an important element of a labour protection policy.
The issue of living conditions for workers is not the responsibility of any one Ministry or government agency, but requires a concerted and coordinated effort of many agencies.
The Ministry of Labour, Manpower and Overseas Pakistanis has an important role to play in this area by encouraging trade unions, employers’ organizations and individual enterprises to be more aware of the linkage between living conditions and worker productivity. The Government is committed to encourage tripartite dialogue ensuring that every effort is made to improve the living conditions for the nation’s workers.
The Government encourages enterprises to consult with workers on the introduction of ‘life skills’ programs within enterprises (possibly after hours) to encourage workers to be more aware of personal health, diet, disease prevention, HIV/Aids and related issues. The design and delivery of awareness programs in this field need careful planning both in content and delivery, particularly for workers with low levels of literacy.
Compliance and Enforcement
Policy pronouncements normally require some form of legislative intervention if intentions are to transform into meaningful action. Legislation in itself, however, is insufficient and amounts to little unless accompanied by a compliance and enforcement strategy. In the field of labour protection, compliance and enforcement is the responsibility of the labour inspection system. The Ministry proposes to introduce a number of new approaches to labour inspection, as presented in Labour Inspection Policy 2006, with an emphasis on prevention, protection and improvement. The prevention of exploitation, work accidents, and health problems arising from work is stressed, as is the need to improve the working environment wherever possible. The emphasis on prevention and improvement applies not only to the limited number of workers engaged in formal wage employment, but also to various categories of workers engaged in the informal economy, as well as self-employed persons.
The Government is committed to the revitalization and restructuring of labour inspection in Pakistan as an essential component for the effective implementation of this Labour Protection Policy 2005. The Labour Inspection Policy 2006, includes the following initiatives.
The Government supports the introduction of an integrated inspection system in which one inspector undertakes most of the interventions in all key areas of inspection, namely, wages and working conditions, work safety, occupational health, and social security contributions, as well as inspection related to specific target groups (e.g. women, child labour). Integrated inspection operates on the basis of ‘one inspector - one enterprise’ in which one general inspector undertakes inspection work in all areas of concern to a particular enterprise. General inspectors require access to specialist expertise to advise on specific technical problems (e.g. chemical storage and handling), but the majority of cases can be handled by a well-trained general inspector.
Self-inspection and self-reporting
The Government also supports the introduction of self-inspection and self-reporting systems for enterprises considered to be ‘low risk’, and on a pilot basis in the first instance.
‘Self-inspection’ really means self-responsibility, with managers and workers assuming responsibility for safety and health and working conditions in the workplace. It is based on the fundamental principle that prime responsibility for all aspects of labour protection rests with the employer, with workers obliged to cooperate with the employer in meeting that obligation.
The role of the labour inspector under ‘self-inspection’ focuses on informing, educating, training and facilitating the operation of a system to encourage self-compliance with the minimum standards set by law. Indeed, the inspector can encourage the parties to strive for working conditions and a working environment, and other aspects of labour protection, that exceed the minimum standards.
An essential component of self-inspection is self-reporting. Enterprises selected to participate in a self-inspection approach will be required to check and report on working conditions and the working environment, using checklists prepared by the Labour Inspectorate. Managers and workers are required to work together in completing the checklist and both parties must ‘sign off’ on the completed form before its submission to the Labour Inspectorate. Failure to complete the checklist and submit it on time, will result in the imposition of an administrative fine on the enterprise.
These reports will be examined by labour inspectors who, on the basis of a ‘desk inspection’, decide whether an actual visit to the enterprise is required. In addition, it may be decided to conduct a detailed inspection of, say, 10% of enterprises irrespective of the outcome of the ‘desk inspection.’
Self-reporting usually applies to low-risk enterprises that have a good past record. It means that these enterprises report on themselves, allowing inspectors to concentrate their efforts on higher-risk enterprises. Self-inspection and the related process of self-reporting work best where there is good cooperation between management and workers, and where both parties are committed to protection and improvement of working conditions and the working environment. Such enterprises usually have strong systems in place to prevent problems from arising, and systems that work well if problems do arise.
Self-reporting provides an opportunity for the modernization of administrative processes. Enterprises will be encouraged to file their reports electronically, which requires that labour inspectorates have the necessary computer equipment and that labour inspectors are trained in its effective use.
In Pakistan, relatively little consideration has been given to some aspects of labour inspection work being delegated to private sector enterprises.
The Government is committed to greater involvement of the private sector in some aspects of inspection work and sees no reason why the inspection of boilers and pressure vessels, elevators, cranes and hoists, other items of specialized equipment, and other specified matters, could not be undertaken by accredited agents from the private sector who have been granted a special license to perform these duties.
The Government supports a system where duly accredited companies and individuals are granted a license to perform specific inspection tasks, working under the authority of the labour inspectorate. The private agents do the actual work but the government still retains ultimate responsibility. The private agents do the actual work but the government still retains ultimate responsibility. The labour inspectorate regulates the work of private agents through the licensing system, and by requiring that reports of all work undertaken are copied to the inspectorate. If agents fail to perform satisfactorily their license is withdrawn or not renewed.
A system of accreditation and licensing will require amendments to the law to ensure that the activities of agents are properly controlled. This does not mean that the labour inspector is no longer responsible. The responsibilities will be different but not reduced, with inspectors assuming responsibility for supervising the work of others, rather than doing the actual work themselves.
Problems and suggestion of Industrial Labor
Problems of Industrial Labor:
1) Not have perfect training.
2) Less skill hence less Pay
3) Bad Working Condition disturbs health of workers.
4) Workers are not Punctual
5) Workers are not efficient
6) Relaxing habit is very high
Suggestions for Industrial Labor are as follows:
1- To develop a class of competent Labour Administrators capable of performing well in responsible positions at the various echelons of administrative hierarchy and maintaining industrial peace in their establishments.
2- To assist Federal and Provincial Governments & Pakistani business and industry in improving and increasing their productivity and efficiency through integrated understanding of Economics, Sociology, Labour Laws, Industrial Psychology, Personnel Management and practices of personnel management.
3- To assist participants attending its courses in developing independence of thought and maturity of character, in facilitating handling of men in an efficient and effective manner and in developing ability to arrive at and convey decisions quickly on various labour problems.
4- To undertake research in the field of Labour Administration, Labour Welfare, Labour Legislation, Industrial Relations, Human Relations, Productivity etc. and disseminate information to National and International Agencies.
5- To educate trade unionists and workers and develop their knowledge and interest in the field of Industrial Relations, Trade Unionism, Collective Bargaining. Labour Legislation etc.
6- To assist, within the framework of international co-operation, member countries of ILO/ARPLA, particularly of the Asian Region, to attain inter-regionat and self reliance in training and preparing effective labour administration system.
7- To assist the workers in enhancing and improving their industrial and group competence and in developing awareness about their changing roles in the field of industrial relations.
8- To assist the workers in development of awareness and a positive attitude towards their rights and responsibilities, maintenance of industrial peace and harmony and improvement of efficiency and productivity.
9- To provide guidance and advisory services to workers and management in the field of industrial relations.
1. Labour legislation does not discriminate against anyone on the basis of sex. Women are not allowed to work in a few areas for health and safety reasons. This is in line with Article 11(f) of the Convention.
2. The Constitution guarantees the right of work for both men and women. Article 18 states “Subject to such qualifications, if any, as may be prescribed by law, every citizen shall have the right to enter upon any lawful profession or occupation, and to conduct any lawful trade or business”.
3. Articles 25 and 27 provide provisions for non-discriminatory and equal opportunity employment to the citizens of the country. Article 34 adds the dimension of affirmative action in favor of women.
4. Appointments to and the conditions of service of persons in the service of
Pakistan are determined by Article 240 of the Constitution of Pakistan.
5. According to the Constitution, labour is a ‘concurrent subject’ i.e. it is the responsibility both of the federal and provincial governments. Labour legislation is usually enacted at the federal level, but the responsibility for enforcing it falls on the provinces. The labour regime in Pakistan is founded on 42 laws (Annex). By law, trade unions are recognized on a plant or establishment basis rather than on an industry wide basis. The following gender-specific protective legislation for women exist in Pakistan:
i) The Mines Act, 1923, Section 23-CC states that:-No woman shall be employed in any part of a mine, which is below the ground. No woman shall be allowed to work in a mine, above ground between the hours of 7 p.m. to 6 a.m.
ii) The Factories Act, 1934 states in section 45 that: No woman shall be allowed to work in a factory except between 6 a.m. and 7 p.m. Except with the permission of the Government, no woman or young person shall be employed in any establishment otherwise than between the hours of 9.00 AM and 7.00 PM.
iii) Hazardous Occupations Rules, 1963.
6. Maternity benefits are an accepted and integral part of most labour related legislation. The following statutory provisions exist in the area of maternity benefits: The Mines Maternity Benefit Act, 1941; the West Pakistan Maternity Benefit Ordinance, 1958; the West Pakistan Maternity Benefits Rules, 196 and; the Provincial Employees Social Security Ordinance, 1965
Equality in recruitment - employment practices
7. All public sector agencies have established practices, procedures, and recruitment rules with regard to employment including that of women. Recruitment rules specify the nature of the job, role and responsibility of the position, nomenclature of the post, qualification and experience required, and age according to the job requirements. These do not discriminate on the basis of gender.
8. From a legal point of view, there is no restriction on women regarding the choice of employment or profession except certain restrictions on some hazardous forms of employment according to the labour laws. However, in practice, it has been seen that women continue to be concentrated in certain professions such as teaching and health.
9. Labour laws have yet to provide cover to the entire Pakistani labour force. The laws become applicable only if an establishment has a certain number of employees. The Factories Act 1934 is applicable where 10 or more workers are employed. West Pakistan Industrial and Commercial Employment Ordinance 1968 is applicable only partially in industrial and Commercial units where 20 or more workers are employed. It is fully applicable only where 50 or more workers are employed. Employees Old Age Benefits Act 1976 is applicable only on an establishment where 10 or more workers are employed.
10. Labour laws do not yet cover workers in the informal sector, e.g. small shops, workshops as well as the agricultural work force. However the Ministry of Labour, Manpower and Overseas Pakistanis and the Ministry of Food, Agriculture and Livestock signed a Memorandum of Understanding in November 2002 to extend protection to workers of corporate agricultural farming concerns. Under this MOU, every worker at the time of his appointment shall be entitled to an order in writing showing the terms and conditions of service; will work for a maximum of 48 hours / week with overtime being paid for additional work; be entitled to service benefits upon termination of employment; be paid at least Rs. 2000/month in cash or kind; be entitled to compensation for injury suffered at work etc. Women working in these concerns will have the same benefits as men.
11. The Pakistan is a signatory to the ILO Convention 111 on Discrimination (Employment and Occupation) Convention, 1958 and the ILO Convention 100 on Equal Remuneration, 1951.
12. The administrative framework relating to labour issues is the Ministry of Labour, Manpower and Overseas Pakistanis at the federal level and the Labour Departments at the provincial level. The Ministry is mandated to deal with a) Employees Social Security Schemes b) Employment (Record of Services) Act, 1952 c) legislation relating to welfare of labour, conditions of labour; provident fund; pensions etc. d) Industrial Relations Ordinance, 1969 e) labour research including compilation of labour statistics for national and international consumption f) dealing and agreements with international organizations in the fields of labour and social security g) keeping a watch on labour legislation from an international angle h) coordination of labour legislation in Pakistan.
13. At the provincial level the Labour Departments perform similar actions in relation to workers in their respective provinces. The right to work as an inalienable right of all human beings
14. The Constitution recognizes this right under Articles 18 and 27. These have been explained under “Constitutional Provisions” in this Chapter. The right to the same employment opportunities, including the application of the same criteria for selection in matters of employment;
15. Article 27 of the Constitution is the operative article in this regard also. There is no discrimination in terms of employment opportunities on the basis of sex or any other grounds. The main criterion for selection is qualification. However the Constitution does make a number of exceptions, which can be categorized as affirmative actions. These exception ns are with regard to reservation of quotas for persons belonging to the less developed areas of the country to speed up the development of those areas. The right to free choice of profession and employment, the right to promotion, job Security and all benefits and conditions of service and the right to receive vocational Training and retraining, including apprenticeships, advanced vocational training And recurrent training;
16. This area is also covered under Articles 18 and 27 of the Constitution. There is no discrimination against women in choice of profession, the right to promotion, job security, the right to receive vocational training and retraining, apprenticeships etc.
17. There exists a detailed set of rules and regulations in the form of Civil Service Rules, governing all aspects of employment in the Public Sector. The rules date back to the Government of India Act 1935 as adopted by Pakistan through Provisional Constitution Order of 1947. Between 1947 and now these rules have been amended from time to time. Additional rules have also been made from time to time.
18. In the public sector the Government has also created a 5% quota for women. This is in addition to the 2% quota for the disabled including disabled women.
19. There is no bar on women seeking and securing employment in any field and at any level in the private sector. The main criterion is merit and qualifications.
20. There is no ministry or department within Pakistan dealing exclusively with vocational training. Various ministries and departments are engaged in vocational training as is appropriate to their mandates. At present training capacity of 29842 trainees places in available under the Technical Education & Manpower Training Authority (TEVTA) and Directorates of Manpower & Training. Besides, 8807 apprentices are trained under the Apprenticeship Training Programme in the country.
21. The Ministry of Labour, Manpower and Overseas Pakistanis has established five Skill Development Councils (SDC) s, one each at Islamabad, Karachi, Lahore, Peshawar and Quetta. The SDCs assess the training needs of their geographical areas, priorities these on the basis on market demand and facilitate training of workers through training providers in the pubic and private sectors. These councils have so far trained 48,486 trainees.
22. However the system of vocational training has not reached maturity in Pakistan. It is also primarily oriented towards males, perhaps because there is still a large difference between the labour force participation rates of men compared to women. For instance the courses offered by the National Training Bureau, a body engaged in vocational training, are: draughtsman, electrician, auto mechanic, machinist, welding, auto electrician, radio/TV mechanic, home appliances repair, industrial electronics, office automation, ecommerce, auto-CAD, graphic designing. Unfortunately no gender-disaggregated data are available for these courses but it seems that the majority of the persons availing these are male. Females are likely to be interested in office automation, graphic design and ecommerce only. The right to equal remuneration, including benefits, and to equal treatment in respect of work of equal value, as well as equality of treatment in the evaluation of the quality of work;
23. There is no discrimination between men and women in remuneration and benefits in the public sector. In the private sector also, entities, which fall within the purview of labour laws, have to give the same remuneration, allowances and benefits to all employees doing the same work regardless of gender.
24. Insofar as quality of work and its evaluation is concerned, in the public sector there exists a well-defined and established mechanism of evaluation in the form of Annual Confidential Reports (ACRs) for employees. The format of the reports is the same for men and women and the criteria of evaluation are also the same. No discretion is left to the reporting officer to make a government official’s gender an issue.
25. If a firm has more than 10 employees then it is bound by the same laws which apply to the public sector in terms of pay and benefits. These laws do not for the moment cover the informal or the agricultural sector. The right to social security, particularly in cases of retirement, unemployment, sickness, invalidity and old age and other incapacity to work, as well as the right to paid leave;
26. There is no discrimination against women in the public sector in terms of social security and the right to paid leave. Indeed there exists certain flexibility in the public sector for women employees and they are more likely to be given leave. This is due to the fact that it is recognized that a woman employee generally has to balance her professional life with her domestic life where she has to take care of the family.
27. Women get the pensions of their deceased husbands unless they re-marry. The female civil servant, on the death of her husband, may be granted special leave on full pay, not exceeding 130 days. This leave is not debited to her leave account.
28. Pregnancy does not affect employment. Women are entitled to 90 days maternity leave. Maternity leave can be granted in continuation of or in combination with any other kind of leave including extra-ordinary leave as may be due and admissible to female civil servants.
29. Women civil servants are equally eligible for a maximum of 5 years leave without pay (extra-ordinary leave) provided the civil servant has been in continuous service for a period not less than 10 years.
30. Female civil servants are equally eligible for ex-Pakistan leave. This leave can be granted even if the civil servant proceeds abroad during leave or takes leave while posted abroad or is otherwise on duty abroad.
31. Women civil servants are equally eligible for 15 days recreation leave during a calendar year. This is in lieu of 10 days casual leave. Women teachers, however, enjoy summer and winter vacations as per rules.
32. Women civil servants can, in case of disability, be granted, outside the leave account on each occasion, up to a maximum of 720 days on medical advice. This leave salary is equal to full pay for the first 180 days and half-pay for the remaining period.
33. Study leave can also be availed by female civil servants under the rules. Female professors, teachers, professional experts like doctors and engineers may be granted this leave subject to the condition that necessary facilities in the particular field of study are not available in Pakistan.
34. Mandatory retirement age for men and women in public sector, is 60 years. Both can voluntarily seek voluntary retirement on completion of 25 years service. This makes men and women eligible for General Provident (G.P.) Fund, Gratuity and other pension benefits. Contributions towards pension are the same for both sexes.
35. The system of social security is still developing in Pakistan. The Provincial Employees Social Security Ordinance, 1965, is specifically designed to a gradual application of the Ordinance and applies to “such areas, classes or persons, industries or establishments, from such date/dates and with regard to the provision of such benefits as notified by the Government”. The Provincial Governments have extended this initiative industry by industry. At present it is estimated that 415,000 workers are protected by the scheme. There is no discrimination between men and women in terms of social security coverage. Women workers are of course entitled to maternity benefits. Additionally wives of male workers are also entitled to these benefits.
The right to protection of health and to safety in working conditions, including the safeguarding of the function of reproduction
36. Article 35 of the Constitution declares “State shall protect the marriage, the family, the mother and the child”. Article 37(e) states, “The State shall make provision for securing just and humane conditions of work, ensuring that children and women are not employed in vocations unsuited to their age or sex, and for maternity benefits for women in employment.”
37. These Constitutional provisions are reflected in the legislation also - the Mines Act, 1923 section 23-C, the Factories Act 1934 Section 27, 32, 33-F sub-section 2,33-Q and the Hazardous Occupations Rules, 1963.
38. Compensation for industrial injuries and ill health are covered by the Worker Compensation Act applying to those workers that fall outside the scope of the Provincial Employees Social Security Ordinance, 1965. It covers compensation for injuries inflicted from, and in the course of employment of a worker. To facilitate the provision of compensation to women, the Act has special clauses on the distribution of such compensation. These payments meant as compensation to women, must first be deposited with Commissioner, Social Security who would facilitate investment of the amount by the recipient, if desired by the latter.
39. The concept of occupational safety is still developing in Pakistan. Previous Labour Force Surveys did not address this issue. However questions on occupational safety were included for the first time in Labour Force Survey 2001-2002, which was released in October 2003. According to this survey, about one out of every twenty-seven employed persons (3.6%) suffered occupational injuries/diseases in the reporting period. Statistics show that male workers (3.9%) are more prone to occupational injuries/diseases compared to female workers (1.5%). Similarly, rural workers (3.9%) are more prone to injuries/diseases compared to urban workers (2.9%).
40. The majority of employed persons who suffered occupational injuries/diseases were concentrated in the agriculture sector (42.9%). The second important group was manufacturing (14.5%), followed by construction (12.5%), community, social and personal services (11.2%), transport, storage and communication (9.4%) and wholesale & retail trade (8.6%). Males follow the overall pattern of both sexes. For female workers who suffered occupational injuries/diseases, again agriculture industry dominated with 71.2% followed by the manufacturing 14.7%, community, social and personal services (9.1%) and wholesale & retail trade (3.1%).
41. The majority of the workers suffering injuries/diseases (48.8%) consulted a medical professional. Of the total, 19.3% took time off work and 14.7% were hospitalized. Sex differential existed in the nature of treatment received. Among male injured workers, the majority (48.6%) consulted a doctor or other medical professionals. Those who took time off ranked second (19.6%) followed by those who were hospitalized (15%); and 16.8% did not receive any treatment. Amongst female injured workers, 51.5% consulted the doctor or other medical professionals, 15.4% took time off and 9.9% were hospitalized. About a quarter of the injured female workers (23.2%) did not get treatment for reasons not recorded. Prohibition, subject to the imposition of sanctions, of dismissal on the grounds of pregnancy or of maternity leave and discrimination in dismissals on the basis of marital status;
42. The public sector in Pakistan fully meets these conditions. Indeed the provisions relating to maternity leave are quite generous. Subject to the provisos on number of employees in an establishment, women workers in the private sector are also covered.
43. It is likely that women employees in establishments which do not fall under the relevant labour laws may be discriminated against on grounds of pregnancy. Unfortunately most employees in such companies and industries are contract workers and can be relieved of their positions quite easily. Women workers are no exception. Generally in such situations a pregnant woman worker herself seeks to terminate her employment as she approaches term. She is not likely to get any maternity benefits etc. Once she is again able to join the workforce, she can approach her former employer and possibly be rehired if there exist a vacancy and if she was good worker.
44. Insofar as marital status of a woman being a factor in employment is concerned the public sector can be said to meet these criteria fully. The one exception is that a government of Pakistan employee (male or female) may not marry a foreigner. If he or she does marry a foreigner, then he/she will have to resign from government service.
45. The Government, as a matter of policy, generally posts both spouses (if both of them are in government service) at the same station so that their family life is not disturbed.
46. In the private sector, entities coming within the ambit of the labour laws cannot also indulge in discrimination on grounds of marital status. Maternity leaves with pay or with comparable social benefits without loss of former employment, seniority or social allowances;
47. The public sector meets these provisions adequately. The relevant rules state that “A female civil servant shall be granted maternity leave on full pay for a maximum period of ninety days and the leave exceeding the period of ninety days shall be treated as leave admissible to and desired by the civil servant”.
48. Maternity leave does not entail loss of former employment, seniority or social allowances. The employee can in fact request additional leave, utilizing her earned leave and combining it with her maternity leave.
49. In the private sector the relevant laws are implemented in those establishments which have the requisite number of employees to come within the ambit of these laws.
50. Women employees in the informal sector do not have a statutory right to maternity leave.
To encourage the provision of the necessary supporting social services to enable parents to combine family obligations with work responsibilities and participation in public life, in particular through promoting the establishment and development of a network of child-care facilities;
51. A number of Government entities do provide some form of child-care facilities. For instance the Ministry of Women Development, Social Welfare and Special Education has a childcare facility, as does the Ministry of Foreign Affairs. However the practice is not uniform and there are governmental entities, which do not provide childcare facilities at all. These outnumber those, which do provide such facilities. Childcare facilities are also not generally provided in the private sector.
52. The joint family system still quite extensively practiced in Pakistan is a form of “social service to enable parent to combine family obligations with work responsibilities”. However the issue of provision of formal and institutionalized social services for this purpose is probably not yet of immediate importance. This is on account of the low female participation rate in the labour force. Such services will however be required as more women join the labour force. To provide special protection to women during pregnancy in types of work proved to be harmful to them.
53. The Constitutional provisions and laws cover this issue adequately. In addition to these, there also exists a societal reverence for motherhood. All these factors ensure that pregnant women generally enjoy special protection and receive special consideration while at work. Protective legislation relating to matters covered in this article shall be reviewed periodically in the light of scientific and technological knowledge and shall be revised, repealed or extended as necessary.
54. As explained previously, review of labour legislation is one of the tasks of the Ministry of Ministry of Labour, Manpower and Overseas Pakistanis. An example is the Ordinance amending the Mines Maternity Benefits Act, 1941 in order to increase the rate of maternity benefit to the rate equivalent to the last pay drawn by the worker. Information relating to General Recommendation 13 Ratification of ILO Convention 100 on Equal Remuneration
55. Pakistan ratified ILO Convention 100 on Equal Remuneration on 15 August 2001. Studies for the development and adoption of job evaluation systems based on gender-neutral criteria that would facilitate the comparison of the value of those jobs of a different nature, in which women presently predominate, with those jobs in which men presently .
56. The criteria for recruitment in Government service are gender neutral. No gender preference is cited in advertisements placed by the Government in newspapers, unless the job is being advertised to fill the 5% quota for women. The only consideration is qualification and merit.
57. Studies comparing jobs in which women predominate to those in which men predominate have not been carried out in Pakistan. It may also be argued that there does not appear to be a tendency in the society to hold jobs in which women predominate to be less important or valuable than those performed by men. Indeed the two professions in which women predominate – teaching and nursing – are considered to be vital to the functioning of the society. Creation of implementation machinery and encouraging the efforts of the parties to collective agreements, where they apply, to ensure the application of the principle of equal remuneration for work of equal value.
58. Pakistan is party to ILO Conventions 87 and 98 on Freedom of Association and Collective Bargaining respectively. The Constitution also guarantees the right to form associations and unions under Article 17 (1) which states “Every citizen shall have the right to form associations or unions, subject to any reasonable restrictions imposed by law …”. As such trade unions are an integral part of the system of labour relations in Pakistan. Trade unions tend to be among the most liberal and progressive segments of the society and they are staunch advocates of all workers rights, including equal remuneration for work of equal value. On the Government side there has never been any reservation to this principal also. Information submitted in response to General Recommendation 17. Time-use surveys as part of national household survey programmes and collecting statistics desegregated by gender on time spent on activities both in the household and on the labour market; Steps to quantify and include the unremunerated domestic activities of women in the gross national product;
59. Integrated household surveys are regularly undertaken in Pakistan. However time use surveys have not yet become a part of the household surveys. The Ministry of Women Development, Social Welfare and Special Education, as a consequence of preparing this report, is initiating action to request the Federal Bureau of Statistics, the national data collection machinery, to include time use surveys in future integrated household surveys. The Federal Bureau of Statistics is of the view that the Pakistan integrated household survey (PIHS) and the Labour Force Survey is amenable to meet the information requirements of the committee in this regard through a few alterations in he relevant questionnaires.
60. At present the unremunerated domestic activities of women are not quantified in Pakistan and the results are not included in the gross national product. Again as a consequence of preparing this report, the concerned agencies in the Government of Pakistan are being apprised of the Committee’s recommendation and will be requested to take appropriate actions in this regard. Information relating to women in the field of employment in Pakistan
61. The following tables give some idea of the situation in Pakistan as it relates to womenemployment.
63. The tables given above show that women lag in almost every area covered by Article 11 of the Convention. There are however signs of change. The Female Labour Force Participation while still quite low, is increasing. In 1981 it was 2.1% and had moved up to 9.9% by 2001-2002. However the unemployment rates give a mixed picture. The one exception is that the unemployed rates for women falling in the 15-19 age group has decreased from 40.7 in 1999-2000 to 20.5 in 2001-2002. Women’s unemployment has increased by about 2-3 points, for other age groups (20-24, 25-29, 30-34, 35-39, 40- 44, 45-49, 50-54 and 55-59 years). The unemployment rate for women is many times higher for every age group. This points to the fact, true of most developing and many developed countries, that women are the last to get jobs and the first to lose them. At the same time it is apparent that the percentage of both sexes in the formal and informal sectors is about the same. Women do not seem to making a preponderant proportion of the informal sector workers.
64. A number of factors may be responsible for the relatively low female labour force participation rate. Many women prefer to remain at home as homemakers rather than join the work force. Many may be prevented from working by family or spouses or other factors such as the need to take care of children. It is also possible that many women are not qualified enough to beat men in open competition for jobs. There may also be a bias against recruiting women by some employers in the informal sector.
65. The labour force participation rates of women while rising, do not suggest that parity between men and women in this area will be reached any time soon. There are a number of reasons. Many women have not yet considered or felt the need for pursuing a career as an option. Many attach greater importance to looking after the kids and the families. Many feel under-equipped, particularly academically, to venture into the labour market. Many are not aware of the opportunities available to them. At least some are discouraged from pursuing a career by their families. This complex mix of factors will only be addressed through the spread of education and a working system of career guidance and vocational training. Absence of protection of labour laws to agricultural labour, the area where most women workers are active, also needs to be considered. It is a complicated issue which impacts on the entire national economy. A solution to it will however need to be devised if agricultural workers are to enjoy the protection of the
Development Review Plan Wise
Pre-Plan Period Situation
Reliable statistical information on the development of industry in recent years is far from complete. Some data are available from the census of manufactures, which is based upon an annual report from the owners of factories employing 20 or more persons and using power.' The census of manufactures has been completed for only one recent year, 1953, and very many firms which should have reported did not do so. The Dapmtm of Supply and Development has gathered considerable information about basic industries. A number of items of information are available also about the production of certain goods-cloth, cigarettes and cement, for example- which are reasonably reliable and correct, and a large volume of miscellaneous figures for different individual industries many of which are estimates of varying reliability. These data leave a great deal to be desired. The most important lack is that there is very little reliable information about any aspect of small-scale and cottage industry. The fibers that are available have been used to the maximum extent possible. For some of the smaller industries for which had not available.
In the economy of undivided India the area that is now P a W n produced e large share of the agricultural, forest and animal products on which the sub-continent's major industries were based. It was primary a supplier of food and raw materials. Thus, jute was shipped to Calcutta for processing and cotton was sent to Bombay and other cities for spinning and weaving. They were the centers of industrial and commercial development. On option, Pakistan was cut off from the industrial facilities to process its raw materials. A very large part of the rapid industrial development in recent years has taken the form of establishing facilities to process these raw materials. Although there has been rapid and firm progress in almost the entire realm of industrial development, it is the industries base on raw materials produced in the country which have flourished' most such as cotton and jute textiles, leather, sugar, cement and papa
In the first year of the country's industry development private investors, presented with a variety of promising opportunities, selected those which assured the high- profits with the least organizational effort and minimum investment. Although this was wise investment policy from the standpoint of the individuals concerned, it did not lead to balanced industrial development from the standpoint of the country. Several industries in which the country has considerable natural advantage remained un-developed for lack of private enterprise. For the purpose of promoting these industries of national importance for which private enterprise was not forth-coming, the Pakistan Industrial Development Corporation was established in January, 1952.
Beginning of the: Plan .period the P. I. D. C. had undertaken some 30 schemes involving a total expenditure~ of about Rs. 560 million, of which the Government's share was about Rs. 380 million, and the private share Rs. 180 million. The P.I. D. Cs. major investments have been in paper and paper board, cement, fertilizers, jute mills, shipyards, and the Sui-Karachi gas pipeline. These six industries account for 85 per cent of the total capital outlay in the projects under execution i t the beginning of the Plan period.
Table 1 presents information about the increase of production of selected major sectors of large scale industry* for which data are available for the years 1948 to 1954, inclusive. Production For the years 1948 and 1954 is evaluated at 1954 prices. In calculating the value columns, ex-mill prices were used as best they could be determined from various sources. The value of Industry production in these selected sectors shows a remarkable increase, fro& Rs. 1302 million in 1948 to Rs. 2813 million in 1954. Quite naturally those industries for which the conditions were most favorable expanded most rapidly. Thus, the production of cotton cloth and yarn increased from Rs. 98 million in' 1948 to Rs. 539 million in 1954, and the production of jute goods from nothing at all to Rs. 65 million in the same period.
Over the last five decades, considerable discussion has centered on the theme of economic development. In low income countries, development has come to be regarded as the most significant index of a country’s progress, and the most important test to judge the performance of governments. The essence of the process of economic development is a general increase in productive efficiency, which is vitally related to an increase in the availability of capital, technological skills, managerial ability and administrative competence. It may be based in varying combinations of these elements.
Faced with economies characterized by deep-seated weaknesses and rigidities too great to be overcome by market forces alone, many newly independent developing countries including Pakistan in the early post Second World Way years resorted to multi-annual comprehensive plans as the most effective means for overcoming economic backwardness and bringing about desired social change. Planning emerged as a tool of development in countries differing not only in their stages of economic progress, but also in their social and economic systems. A multi-year national development plan is a body of economic and social policies expressed in quantified targets and defined tasks. Ideally it sets forth (1) Overall social and economic objectives, (2) policies and strategies to guide the development process, and (3) a fairly detailed programme for implementation.
Foreign aid agencies have also played a significant role in promoting planning in the developing world. The macro economic plans that calculated foreign exchange needs, and showed that a country could profitably absorb foreign aid, were used by bilateral and multilateral agencies to justify credits and grants.
This chapter provides an overall picture of Pakistan’s economic progress during the past five decades through a succession of multi-year plans. During this fifty-year period the economy has altered significantly. The size of the national product has grown substantially, its structure has become more diversified and developed, and the practices and techniques of production have been significantly modernized. For an economy deficient in crucial natural resources, the transformation has come a long way. It has involved scarifies for large sections of the people. Although the inflow of foreign assistance helped finance mounting development outlays, the burden was also borne by a sizeable domestic savings effort, especially in relation to the low level of per capita income.
The country’s development effort has had its shortcomings. The rate of population growth stepped far above historical rates, and, as a result, much of the gain in output did not lead to improvement in standard of living. Concentration of wealth increased. The expansion in the provision of social services proved insufficient to satisfy the needs and aspirations of the people. There is a growing disenchantment with the inequitable nature of the growth pattern, an acute impression that the development process has discriminated against poorer regions and income groups.
The economic development of Pakistan has not run smoothly on a single course over the past five decades. When the subcontinent of South Asia was partitioned in 1947, the few existing industrialized regions fell to the share of India: the cotton textile industry in the west, the jute industry in the east, steel in central India, and a variety of medium sized industries, most of them established during the Second World War, mainly in the south. Pakistan’s share was the least developed part of the subcontinent. East Bengal, which produced jute that it could neither bale nor manufacture, had mainly a large unskilled population. In the West Wing (present Pakistan), the Punjab had a well developed irrigation system and a population which had traditionally contributed in large part to the British Indian Army; a population which, despite the departure of the Sikhs, was recognized for its excellent cultivators and colonists. Pakistani Punjab has a capable, skilled and stalwart peasantry, including those who came from East Punjab. The North-West Frontier Province was populated by virile Pathans and Sindh was rich in agriculture as a result of recently constructed barrages and canals, but had a ruthless system of feudalism, even for this part of the world.
The subcontinent as a whole was industrially backward, industrialization having begun only towards the end of the nineteenth and the beginning of the twentieth centuries. And, it was unevenly distributed, partly by design and partly by neglect. Thus disparities were created in the development of different regions and the parts which later came to constitute Pakistan lagged behind in industrial development. Industries had grown up largely behind in industrial development. Industries had grown up largely in and around the ports of Bombay and Calcutta. The Pakistan areas produced 75 percent of the raw jute and a high proportion of the best varieties of cotton in the subcontinent, but at the time of Independence it had no jute mills and only a few jute baling presses. The jute trade, both manufacturing and exporting, was based in Calcutta. Similarly, the bulk of long staple cotton grown was sent to western India for processing in its textile mills, and the areas which were to become Pakistan imported their requirements of manufactured goods.
Pakistan, however, inherited some of the best irrigation facilities. Nearly the whole cultivated area of Sindh, Bahawalpur and a large part of the Punjab had excellent irrigation systems. Of the total net sown area in West Pakistan, about 76 per cent was under irrigation and the yielded per acre of various crops was higher than elsewhere in the subcontinent. The partition cut across the irrigation system leaving in India many of the headwork’s of canals which were of fundamentals importance to Pakistan’s Punjab. The rivers, on whose waters the economic existence of West Pakistan depended, flowed to Pakistan from India via Kashmir and East Punjab. This gave India control over the supply of water in Pakistan and kept the two countries in a state of high tension until the intervention of the World Bank brought a settlement.
The areas of Pakistan were predominantly agricultural. According to the 1941 census, only 11 percent of the population in these regions was classed an urban while 89 percent was rural. At the time of Partition it was expected that West Pakistan would have a self-sufficient food economy and might have a surplus of about 5 lac (1 lac = 100,000) tons of wheat for export. East Pakistan on the other hand was deficient in rice production. For its export earnings, Pakistan was mainly dependent on two cash crops, jute and cotton, and for its requirements of capital and consumer goods it was entirely dependent on imports.
At the time of Independence, the railways, a crucial component of infrastructure, were in a deplorable state of under-development. Out of a total of 41,149 route miles in the subcontinent, Pakistan had 6890 miles or only 17 percent. West Pakistan inherited a total of 5362 miles of the North Western Railway, including 319 miles of the old Jodhpur (meter gauge) Railway, and 1618 miles of railways in Bengal and Assam came to East Pakistan. The system in the East wing was broken into several parts, with broad and meter gauge sections, and was burdened with a large surplus staff in the lower ranks. With Calcutta forming part of independent India, and the consequent change in the pattern of traffic, the port of Chittagong, which had been dismantled during the Second World War, had to be rebuilt. Because of the diversion of traffic from Calcutta and the stoppage of India’s cross traffic between Calcutta and Assam, the broad gauge section lost most of its traffic. The North Western Railway was better placed; its most serious problem arose from the uncertain and reduced supplies of coal from India, solved in part by converting some of its steam engines from coal to furnace oil and purchasing diesel electric locomotives.
The meager industrial endowment of the areas which constituted Pakistan at the time of Independence was evidenced by the fact that out of the 14569 industrial units in British India in 1947, only 1406 were located in the areas included in Pakistan. Thus, while our population was about 23 percent of undivided British India, the manufacturing capacity located in Pakistan was barely 10 percent; and even this comprised, mainly, such relatively small and unimportant units as flour and rice mills and cotton ginning factories. To make the situation worse, Pakistan lacked industrial credit facilities, technical institutes and research laboratories.
The task before the infant State was stupendous. The economy had to be rehabilitated and built on strong foundations with the meager resources at its disposal for a large number of competing and pressing demands. The government was alive to the crucial role of industry. After careful deliberation, it announced the first industrial policy in 1949. Realizing the pioneering role which private enterprise could play in industrial expansion, the government threw open all fields of industrial activity to it, except three categories namely, the manufacture of arms and ammunition, the generation of hydroelectric power, and the manufacture of railway wagons, telephones, telegraphic and wireless apparatus.
This industrial policy aimed at providing facilities to process the raw materials for cotton and jute products, leather, sugar, cement and paper. The emphasis was placed on quick growth based on domestic resources, and on creating a new class of industrial entrepreneurs with in the country. The policy broadly envisaged expansion of production, specially in the consumer goods industries, maximizing the scope for private enterprise and enhancing export earnings.
The government assured all possible help, including financial credits for the establishment and development of private industry, and stated its willingness to give favorable consideration to claims for measures of protection to new industries. It welcomed the participation of foreign capital provided that the domestic share was 51 percent in 13 industries, which were regarded as essential, and up to 30 per cent in other industries. The government felt that, if enough would indigenous capital was not forthcoming, foreign investors would subscribe the balance. An assurance was also given regarding the remittance of profits. To put the industrial policy in to operation, an advisory council for industries and a number of advisory committees were appointed to consider development in specific industries.
Early Attempts at Development Coordination
Despite the magnitude of the problems which faced Pakistan immediately after Independence – the relief and rehabilitation of refugees, the dislocation in trade and commerce, the disruption of the transport system, the imbalance between public revenues and expenditures, the security problems of the new state – the Government of Pakistan decided that high priority must be given to nation building schemes and a Development Board under the chairmanship of the Minister for Finance and Economic Affairs was set up in early 1948 to:
1) Coordinate development plans, central and provincial, so that the available resources were put to the best possible use;
2) Make recommendations regarding priorities among development plans;
3) Prepare, under the orders of the Economic Committee of the Cabinet, memoranda on matters of general policy affecting development as a whole or any special aspect and
4) Monitor the progress of development schemes in order to remove bottlenecks and difficulties in the way of uniform progress in all sectors and to make periodic reports to the cabinet.
To associate industrialists, bankers, business men, merchants and other interest in a advisory capacity in the important task of planning and development, the government established in 1948 a Planning Advisory Board consisting of both officials and non-officials. It had the following functions:
1) To advice government generally on matters relating to planning and development;
2) To review progress made in implementing the plans; and
3) To educate the public about the various development schemes undertaken in order to get their enthusiastic cooperation.
By the end of 1950, the Development Board had approved a number of schemes whose total cost was estimated at Rs. 1125.68 million. Table I Show the distribution of expenditure between the centre and the various provinces. The schemes of the provincial governments were financed largely by loans and grants from the federal government given on the recommendations of the Development Board which specified conditions for these loans.
Unit Wise cost of development schemes approved by the Development Board up to 31 December 1950
( in Rs 000)
Total estimated cost
Estimated cost during 1948-49
Estimated cost during 1949-50
There are no estimates of changes in small-scale and cottage industries. It is likely that while growth has been taking place in small industries, it has not been so rapid as in large-scale industry. Although as yet no comprehensive index of industrial production is available, a partial index based on the production of 17 industries, mostly consumer-goods industries, and using 1950 as the base year equal to 100, shows an increase to 350 in 1955.
It, is clear that at independence there was little underdevelopment In Pakistan aside from the traditional cottage and handicraft industries. Since then, development has been very rapid-almost spectacular; the output from large-scale plants has much more than doubled. . The share of industry in the entire national income has been rising, but still represents only a small part of the total. Its rate of growth has, however, probably been higher than that of any other sector. Since independence, investment in consumer-goods industries has proceeded at a faster pace than in producer-goods industries. Excluding railways, power stations and ordnance shops, which are not included under “industry " for purpose of this chapter, about 60 per cent of present industrial mvestment is in consumer goods industries as against 40 per cent in producer-goods industries. It is natural that in the early stages of industrial development light industry, being bss capital-intensive and involving simpler technology, should expand more rapidly than heavy industry. This was also necessary to gain self-sufficiency in consumer goods in order to release foreign exchange resources for the purchase of capital goods. It has also introduced a measure of stability in the economy of the country.
The foregoing paragraphs summaries the available information about the growth of industry since independence. It is possible to give a somewhat fuller account of the situation just prior to the Plan .period. Table 2 presents adoration on large-scale industrial production in 1954, and covers a somewhat wider range of industries than Table 1. The striking feature of this table is the heavy concentration of production in three categories : agricultural processing industries, food products industries (including tobacco), and textiles. Together these three groups accounted for production of a vale of about 2570 million rupees out of a total large-scale industrial production of about 3410 million rupms, or about 75 per cent of the whole. This is an indication of the dependence of the country's industry on agricultural raw materials. Very rough estimates of production in 1954 in various sectors of $mall-scale industry show approximately the same degree of dependence on such materials.
To a large extent the industrial development of recent years has been guided not by a carefully worked out long range strategy, but by a series of ad hoe decisions based on what seemed most necessary and expedient at the time. This does not mean that the development that has taken place was wrong. We have been impressed by the fact that the great majority of plants that were established were soundly conceived, and the resulting industrial structure is effective and solidly based. Nevertheless, the situation has changed. Many of the easy and obvious opportunities for investment which offered prospects of large immediate profits have been exploited. Pakistan has natural advantages still waiting to be systematically developed in many industries.
In established lines as more industrial capacity is installed, the days of automatic profits will pass, and competition will begin to force the attention of businessmen towards increasing efficiency and lowering prices.
Future investment must be more carefully planned to bring maximum results. In general the Plan period must be a period of consolidation, fuller use of existing capacity, and better balanced development. The country's industrial base must be consolidated, but this is not inconsistent with a well planned expansion of industrial development. Industrialization must maintain its tempo though on a more carefully planned and balanced basis. This along with improvements in agricultural production holds out the main hope of improving the foreign exchange position of the country in a reasonable period of time to a point, where in addition to meeting maintenance requirements, the country would be able to finance from its own resources a sizeable programmed of development from year to year. Industries permit better standards of living and generate larger profits that can be utilized for expanding investment programmes. Industrialisation is also needed to provide employment for the increasing labour force in urban areas.
Planning from 1951 to 1998
First Five-Year Plan (1955-60)
Realizing the need for a separate high-powered body to prepare a comprehensive and coordinated blueprint for development and to raise the living standards of the people by ensuring rapid, equitable and socially responsive growth, the Government of Pakistan set up a Planning Board in July 1953. The first five year plan (1955-60) was produced by this planning board in 1956, with assistance from the Harvard advisory group. It had an estimated outlay of Rs 1080 crore – Rs 750 crore in the public sector and Rs 330 crore in the private sector. The plan aimed at increasing national income by 15 percent and per capita income by about 7 per cent.
The first plan was a comprehensive and coordinated attempt to harness human and physical resources to the maximum extent possible and to open opportunities for a richer and more varied life. It was designed to prepare the ground for a rapid building of the infrastructure and the productive potential of the economy. However, for various reasons, mainly political instability, the plan’s performance fell below the projected targets. Although the plan commenced from 1955, it did not get government approval until 1958. Adequate attention was not paid to its recommendations and priorities and there was no proper coordination between planning and budgeting. Against the plan’s expectation of a 15 percent increase in national income the actual increase was about 11 per cent. The rise in per capita income also did not exceed 3 per cent mainly because of the rapid growth of population.
The financial resources available for development purposes in the public sector during this period also fell short of expectations. The total non-development expenditure exceeded the government revenue receipts by Rs 28 crore, as against the surplus of Rs 100 crore envisaged. The entire excess of non-development expenditure over revenue occurred during the first three yeas of the plan; in the two years, public savings were positive. Foreign exchange earnings from exports fell short of projections by about 94.6 crore, because both the volume and the prices of the country’s chief exports of primary commodities declined sharply. On the other hand, imports were about Rs 216.5 crore less than expected. Because of the sharp increase in the prices of imports, the shortfall in real terms was larger. Cutbacks were particularly severe in imports of development goods and allocations to the private sector. Serious shortages of imported raw materials and consumer goods were also experienced. Receipts from project and commodity aid (excluding food) were also about Rs 82.3 crore less than expected, due largely to procedural and administrative delays in commitments and utilization of foreign aid.
A disappointing failure of the First Plan was in the key sector of agriculture. The Result as that heavy imports of food grains became necessary, and the country spent about Rs 70 crore of its foreign exchange earnings on imported food grains and on the freight for those quantities received as aid, compared with Rs 41 crore provided in the plan. However, industrial production showed good progress, notably in cotton textiles and sugar. In the fuel and mineral sectors, increases in output were low except in the case of natural gas, which showed substantial growth. The increase in installed industrial capacity was close to expectations. The water development programme fell considerably behind schedule, and the acreage reclaimed from water logging and salinity was below target. Investment in rail transport, roads, ports, civil aviation, telecommunications and postal services was satisfactory. Performance was, however, poor in the development of inland water transport and roads in East Pakistan. In the field of social development, moderate progress was realized. Housing received a strong stimulus but only during the last two years of the plan; and medical, hospital and social service facilities showed modest improvement. Education made some perceptible progress, though less than expected. Primary school enrolment increase only a little ahead of population growth; secondary school enrolment rose by 25 percent, and the out-turn of agricultural, engineering and medical personnel increased between 30 and 150 percent.
In October 1958, Martial Law was declared in the county. From the point of view of the planners, the most important contribution made by the Martial Law regime was the recognition accorded to the planning organization; the status of the Board was raised to that of a Commission; the President of Pakistan because its chairman, and a deputy chairman with the status of a federal minister was appointed to assist him. The second five year plan (1960-65) was formulated by the Planning Commission in the light of the experience of the First Plan and with the full support of the new government.
IMPORTANCE ON INDUSTRIALIZATION IN 1st ECONOMIC DEVELOPMENT PLAN (1955-1960)
1. Industrialization is perhaps the most significant process in economic development. The purpose of economic development, in the circumstances of the country, is to execute and complete as rapidly as possible the transition from feudalism to industrialism. The community has to be lifted from a low to a high level of technique; the method is predominantly one of industrialization. The country needs to make the fullest use of its resources; the processes of production need to be revolutionized to produce better and better goods in ever-increasing volume both for investment and for consumption. The occupational structure of the country has to be strengthened and diversified to provide employment at increasingly higher levels of productivity.
2. Industry and agriculture support and complement each other. Special emphasis on agriculture is necessary in the Ran period to prevent the danger of imbalance between agriculture on the one side and an expanding industrial sector on the other ; to provide food for the increasing urban population and industrial labor; to ensure export earnings, and to increase the income of rural and agricultural workers who constitute the majority of the population and are therefore the largest potential buyers of industrial products. Agriculture needs the drive and enterprise which characterize industry. Agriculture development is vital, but there is no conflict between agriculture and industry ; there need be no slackening of the process of industrialization. industry is second, but a very close second, to agriculture in priority. Whatever the shifts in emphasis from time to time, industrialization must always remain as the main ultimate objective.
3. The progress of industrialisation in recent years has been spectacular. The sate of progress recorded compare favourably with the highest achieved in the histmy of industrialisation in any country. The economy which was exclusively agricultural at partition is rapidly acquking a semi-industrial chdracter. The country then was a producer of food and raw mat8rials and an importer of manufactured goods, but is now producing more and more of the manufactured goods needed for consumption an4 for Increasing export earnings. Yet this is no more than a beginning of the process of industrialisation. A country which has a leeway of centuries, to make up cannot think of rest periods. We conceive of our industrid programme in the Plan period as one first, of consolidation which will include improvement, modernisation and balancing of existing plants, and second, of a further advance on a broad front. The main objects of the programme are (a) improvement of the people's welfare, (b) improvement of the foreign exchange position, and (c) supplying the materials needed by the country for implementing the Plan. Consolidation and development must p r o d simultaneously ; the very idea of a breathing time to look back, take stock, settle down comfortably, and then to think of the next stage is inconsistent with thk speed and tempo of the atomic age, and wholly repugnant to the philosophy of dynamic life which has given birth .to Pakistan.
4. The scientific and industrial revolution which has transformed the techniques and levels of production in advanced countries presents large opportunities for promoting the welfare of the people. The country can draw upon the results of scientific and technological advances made by other countries. These opportunities must be seized as rapidly as available knowledge and resources permit. Industrial development is based upon the application of scientific technology. The country must select and apply the scientific discoveries of the past and also keep abreast of current progress. The technology needed is that which will permit easier, cheaper and more abundant production. To obtain such technical knowledge and adapt it for use requires a special kind bf research which the country has yet to establish ahd promote.
5. Industrialisation means a social as well as an economic revolution. The migration of workers from apiculture to industry brings new urban concentrations and gives rise to large scale problems of housing, sanitation, family disruption, and unaccustomed ways of life. The use of factory production inevitably leads to revolutionary changes in the ways in which people live, work, and think. It has caused social misery, squalor, and distress in other countries in the early stages of industrial development,. It produces profound changes in social attitudes and relationships, and generates the need of new institutions. Enormous problems of human adjustment and of social and economic policy Bll the path of industrialisation with hazards of all kinds through which the country must chart its course wisely, fully using the experience of others. To accomplish successfblly the rapid change which is taking place and will continue to We place for many years to come will call for peat forethought, careful plandug, and delicate handling by government officials and private citizens, in a spirit of devotion to the country's future.
6. We mention briefly here some of the main problems with which the country has to contend in promoting industrial development. The most prominent among them is that of limited availabilities of foreign exchange. This is frequently a feature of an under-developed country engaged on a dynamic programmed of economic development. A backward economy subsisting on an undeveloped base of apiculture and small-scale industries usually has no problems of foreign exchange. Its requirements of consumer goods are small and simple, and can be satisfied from the exchange earned by exports of food and raw materials. This easy position is liable to change to one of acute scarcity of foreign exchange when the country b e a s to import capital goods for industrialisation, and the people begin to acquire new tastes and develop new requirements, such as those for education, health, and better houses. Pakistan has entered this critical stage. The solution lies in a diversified and ambitious but balanced and realistic programmed of industrial development, combined with larger agricultural production. The foreign exchange problem will be solved by increasing production for export, for replacement of imports, and for meeting new requirements of the economy from internal sources. A slackening of industrial development which must inevitibly be accomplished by a slow rate of general development is no solution, because it would seriously accentuate social and economic problems. Attempts to maintain a high level of development in other than industrial fields will intensify, not relieve, the foreign exchange situation.
7. As the industrial development of the country proceeds, more and more machinery and equipment will be purchased and installed. This creates the important problem of maintaining the plant in a good condition. In a country using modem machinery on a large-scale for the fist time, maintenance is likely to be inadequate, partly because of insufficient care on the part of operating agencies, and partly because of the lack of facilities. Usually there is insufftcient awareness of the risks from inadequte care, and of the benefits from adequate maintenance.
The situation has been aggravated by the short supplies of spare parts resulting from scarcity of foreign exchange. A little preventive care can keep plant and machinery functioning properly and prolong its life.
8. Industrial development requires increasing amounts of fuel and raw materials. There will be substantial increases in domestic supplies but not enough to dispense with imports. A careful and wise management of foreign exchange resources is essential so that enough fuel and raw materials are imported to operate existing, industries units at economic levels, 'and that new plant can 'be established to improve the country's ability to obtain the needed supplies.
9. Industrial development requires large numbers of persons with various kinds and degrees of technical skill: production workers, machinists, foremen, engineers and engineering technicians, accountants, salesmen, managers and so on. The country is just beginning to have some people trained in these skills and very extensive training programmes are necessary to increase their supply. It seems inevitable during the Plan period that: the supply of trained personnel will lag behind requirements and exercise a constricting influence on the development programme. The most critical shortage will be in the supply of trained managers.
10. Larpscale organised indwtry is generally conceived in ferms of li& industry and heavy industry ; the industrial development programme must be so framed as to maintain a balance between them. Broadly speaking, light industry turns out consumer goods, such as cloth, matches, cigarettes, radios, and shoes; heavy industry produces goods needed by other industries or for construction, such as cement, heavy chemicals, and steel, and railway carriages. The distinction is not sharp in all cases, for other needs many goods industries as well as for consumption. Similarly what are known as intermediate goods might be the concern of light or heavy industry according to their nature or practical convenience. The distinction is, however, of basic siflcance in Srogrammes of economic development. It is one of the purposes of planning to s&&e a balance between the claims of light and heavy industry a-wording to the needs of the economy from time to time Emphasis on one or the other in one period would influence the distribution of resources in future periods between consumption and investment. A strong emphasis on heavy industry is sometimes advocated to facilitate larger investment programmes and more rapid development in the future, or for developing defence potential. As against this, emphasis on light industry can be jusmed for brinag a rapid increase in consumption levels in the immediate future. This distinction, and the need for striking a balance, is of special significance in long range planning. It is necessary to maintain a long-term perspective while preparing plans for five-years or similar relatively short periods.
11. We have drawn attention to some of the major problems of industrial development. The programme we have framed attempts to meet these problems. We cannot claim to have made more than a first attempt, however, and constant thinking and planning will be necessary to erlsure that industrial development will promote the welfare of the people. In piloting the country through the stage of transition to industrblism the Government have to play the major role, guiding, assisting, encouraging and leading the people. But the role of private entrepreneurs is equally important. Planned industrial development directed towards defined social goals instead of immediate profits involves 8 challenge to them. Their answer, expressed in deeds and attitudes, will determine their future in this country. It is in the sphere of industrial development that private enterprise establish its claim to a permanent place in the social and economic fabric of the country. It will be judged finally and decisively in terms of the service it renders to the people.
9. The purpose of industrial development is to produces, with the resources that can be devoted to it, the large amount of those products which are wanted most in the country. The objective is to pursue those development opportunities that are most efficient in the sense that they will geld the largest returns to the nation In relation to the investment that must be made. Thus an investment in new plant or in improving existing plant which would cost 10 million rupees and would thereafter add 5 million rupees each year to the national product should clearly be preferred to an alternative investment which also would cost 10 million rupees, but would add only 1 million rupees to the national product. Maximum immediate returns are not the only consideration, however. The benefits of each scheme must be judged in its reason to the total programme and its long range prospects. Schemes in oil exploration, iron and steel, and forestation are examples of investments needing to be' planned in the long-term perspective.
10. The second objective of industrial development and in many ways the nost important in the present ciroumsbces of the country is to earn or save fox&@ exchange. The country's foreign exchange situation is very tight, and is likely to remain so for some years. Foreign exchange earnings will grow over the next few years ; but a substantial improvement earn come also from increased domestic production of goods now imported. As plants are installed which enable domestic production to be substituted for imports, foreign exchange ,will be freed which can 'be used to import more machinery and raw m a t e s for further plants. If the successive investments are large enough, the country can overcome the extreme strategy of foreign exchange which characterizes the economy now. The purpose must be to invest in those industries which save the largest amount of foreign exchange in relation to the cost of the investment. An investment which saves an amount of foreign exchange annually equal to 50 per cent of the investment should clearly be given priority over an investment which only saves in foreign exchange 10 per cent of its cost each year. Resources are scarce, and must be employed in those activities where the returns will be highest.
11. The third objective of industrial development is to put people to work ; to employ the labour force usefully and for the benefit of the community. The fundamental characteristic of industrial production is that through organization and the use of tools and equipment workers are enabled to produce things which they could not produce at all, or could produce only very slowly and at much greater cost, if they worked alone. To employ people in well-conceived industrial enterprises-whether small or large-means to obtain more output per worker, and thus to increase the national product for distribution among the people. h addition; under present circumstances there is a great deal of un-employment and under-employ in the country, and it is a major objective of national economic and social policy to create additional opportunities for productive employment for those who want work. Here again the available resources must be used wisely in order to obtain the maximum amount of employment from the resources invested. Bad it is vitally important to consider the indirect employment as well as the direct employment which will result from a given investment.. For example, a power station will normally employ only a few people directly in its operation, but will provide electricity for the operation of many industrial plants employing perhaps many thousands of workers. Even where the results of indirect employment cannot be seen so clearly, such results d from investments and are often substantial. Large profits from new investments will permit the development of social services and create new jobs.
12. There bas been much discussion in recent years about the relative value in an under-developed country of investments intended to obtain the maximum increase in national income through using the most modern technical methods and those intended to employ the maximum number of persons through using less modern technological methods. This issue is often described in terns of a distinction between “capital intensive" and clabber-intensive" investments, the latter often being regarded as preferable. In an under-developed economy, suffering from scarcity of capital the question of technology is very important; but capital-intensive investments cannot be rejected without duly analyzing and weighing all the relevant factors. Full account must be taken of the indirect employment generated by such investments as well as of the profits created by them which permit expansions of employment and facilitate larger investment programmers. In a number of cases highly. capital-intensive industries are thoroughly desirable even under present circumstances in the country. For example, power stations will yield high returns in terms of additional national output and at the same time create large opportunities for additional employment. The jute industry also must employ the latest equipment in order to establish itself in the competitive world market.
13. Many of the assumed conflict$ between capital-intensive and labour-intensive processes are stated in. terms of extremes, neither of which offers the best solution. It would be possible, for example, to build large construction projects at the one extreme almost entirely by hand labour and at the other extreme almost entirely by machinery. It is frequently claimed that the one is preferable from the standpoint of employment and the other from the standpoint of national income. Both assertions are only partially true. To operate such a project exclusively with hand labour would usually be so costly that other projects would have to be deferred and their employment opportunities lost. To operate it exclusively with machinery would likewise require such a heavy investment that other projects would have to be postponed and their potential contribution to the national income lost. The true solution to such problems will probably be found at some point between the two extremes, based upon the relative cost and efficiency of doing the job with different combinations of labored capital equipment. In this country it will ordinarily be profitable to use a higher proportion of labour than is customary in advanced countries, because labour is more abundant and cheaper. But it would be easy to go too far and put misdirected emphasis upon creating any kind of jobs, or upon preserving stagnant and outdated
techniques in order to avoid apparent disturbances in employment opporhities. Such actions would slow down the rate of increase in national- income and cut down the total opportunities for additional employment. The history of economic development shows that improved techniques, while causing immediate disturbance to employment, have contributed to expanded production, consumption and employment. Progress indeed would be inconceivable without them.
14. Unfortunately there has been little Bcientific study of the relative costs and benefits of adopting different techniqaes in specsc cases. The necessary engineering and economic research has not been conducted anywhere in the world, so far as we are aware, which would permit an informed decision to be made about the best technology to use in each industry, given the relative scarcity of capital and abundance of labour in this country.' In these circumstances we have made the but judgments we could in the specific cases that faced us. Our recommendations give strong emphasis to small-scale and cottage industries, where employment per unit of capital L often hi&, in those cases where production is relatively efficient or can be made so. It is necessary, however, to guard against the danger of perpetuator out-dated and inefficient techniques at the cost of society. Protective measures once extended, are difficult to withdraw and tend to become permanent.
New investment in large-scale industries
There were, on 30th June 1955, about 3,000 factories employing more than 20 workers and using power, with a total investment in fixed and working capital of about 2,300 million rupees. The expansion targets established under the Plan call for the investment of another 3,000 million rupees of which 2,700 million would be for new capacity and 300 million rupees for modernisation. Of these amounts about 1,600 million rupees would be private investment and 1,400 million rupees would be public investment, largely through the Pakistan Industrial Development Corporation. The foreign exchange component of the total investment is estimated at 1,900 million rupees. The division of past and proposed investment among major industrial groups is shown in Table 3.
As shown in Table 3, the total proposed allocation for investment in specific industries is Rs.' 3,018 million. In addition, the reserve for additional investments in East Pakistan in such industries as engineering, steel re-rolling, etc., is Rs. 355 million. Against these totals there is certain to be a considerable shortfall owing , to such factors as delays in preparing detailed schemes, delays in construction, a ck of managerial staff, etc. We
have not made any estimate of the likely degree of shortfall in the industrial sphere. If, however, the percentages of shortfall which we have allowed for the Plan as a whole were applied to public and private investment in industry, the actual expenditures for industrial investment during the Plan period would be about 2,500 million. The foreign exchange component of this amount would be about Rs. 1,600 million. These, rather than the total amounts shown in Table 3, are the sums for which resources would have to be found. .
The proposed investment of 3,000 million rupees, about 1;600 million is in producers' goods industries as against 1,400 million in consumers' goods industries. This would raise the share of investment in producers 'goods industries from around 40 per cent at the beginning of the Plan period to around 45 per cent at the end. Major invesments in producers"oods industries will be in cement, heavy chemicals, fertiliser, newsprint, and shipbuilding. In addition to the industrial investment included in this chapter, the Plan includes-investment in capacity for manufacturing railway carriages and wagons and telephonic equipment and investment
in the installation of power plants and transmission lines, included in .the Chapters on Transport, Communications, and Power. A very large proportion of total investment under the Plan is thus in what is sometimes called " heavy industry ", whose output is producer goods for further investment.
Second Five-Year Plan (1960-65)
The Second Five Year Plan envisaged an outlay of Rs 2300 crore – Rs 1462 crore in the public sector and Rs 838 crore in the private sector. In addition, an amount of Rs 160 crore was provided for the rural works programme which aimed at initiating self-help programmes. The Plan sought to speed up the pace of development and overcome the inadequacies of achievement during the First Plan period, and to ensure that the stage of self-generating growth was reached within a measurable time.
The second plan was more than successful in fulfilling its major objectives. The increase in national income during this period was over 30 percent as compared to the target of 24 percent. The total development expenditure was estimated at Rs 2745 crore, excluding an expenditure of Rs 64 crore under the rural works programme, as against the planned Rs 2300 crore.
Economic development was characterized and sustained by a healthy growth rate in the agricultural sector. In fact, the basic change brought about by the Second Plan was the restoration of a balance between agricultural and industrial development. Whereas the annual growth rate during the 1950s was 1.3 percent in agriculture and 7.4 percent in industry, the respective growth rates during the 1960-65 periods were 3.4 percent and 10 percent.
This period also witnessed significant changes in economic policies. The economy was progressively freed from direct administrative controls, and greater reliance was placed on the market mechanism. An important factor in increasing agricultural production was the abandonment of food grain rationing, the establishment of support prices for wheat at a remunerative level, a 50 percent subsidy on fertilizers and more liberal imports of tube wells, pumps, and other farm machinery for the private sector. There was a general relaxation of controls on imports. The main objectives of the import policy during this period were to ensure a fuller utilization of industrial capacity, the strengthening of export industries, a gradual reduction in the import of goods produced locally and a more rapid development of backward areas. The list of items placed on automatic licenses was gradually increased. The Export Bonus Scheme covered all industrial products and a few primary commodities, and was extended to remittances from abroad and to shipping. There were two basic rates of 20 and 30 percent for purposes of bonus premium. Increased availability of goods and services, as a result of high growth rates as well as import liberalization, were instrumental in maintaining price stability, despite and increase of 48 percent in money supply during the period.
One of the main successes of the Second Plan period was the stabilization and the improvement in the balance of payments position. Export earnings were higher than estimated, import requirements were smaller than originally projected, and the country exceeded the investment targets despite a lower than projected availability of external resources.
The projections of foreign exchange earnings anticipated an increase from Rs 212.7 crore in 1959-60 to Rs 245 crore in 1964-65, yielding a total of Rs 1125 crore and leaving a gap of Rs 1095 crore to be covered by foreign assistance. The actual total earnings for the period, however, were Rs 1322.8 crore, exceeding the target by 18 percent. At the same time, total imports were Rs 2068 crore or 6 percent less than the original estimates. Consequently the foreign exchange gap was only Rs 745.9 crore as against the projected Rs 1095 crore. Actual exports including invisibles reached a level of Rs 302.5 crore in 1964-65, an increase of 44 percent over the export in 1959-60. Export earnings improved at an average of about 7 percent, the total during the period exceeding the target by Rs 197.8 crore. This was helped by an improvement in the institutional framework for exports. The Export Promotion Bureau was established with regional offices at Dhaka and Lahore.
According to projections, Rs 1095 crore, or about 50 percent of the total foreign exchange requirement of Rs 2200 crore, would have to be obtained from external resources in the form of loans and credits, private foreign investment and technical assistance. In fact, external assistance for 36 percent of the total imports.
It was possible to proceed with a larger investment programme with considerably less by way of foreign exchange loans and investments than projected in the plan because the country’s own earnings exceeded the estimated amount by Rs 197.8 crore. The total external aid committed during the period amounted to Rs 1061 crore. However, the aid actually disbursed amounted to Rs 753 crore, thus increasing aid in the pipeline by Rs 308 crore.
IMPORTANCE ON INDUSTRIALIZATION IN 2nd ECONOMIC DEVELOPMENT PLAN (1960-1965)
The precise composition of the industrial programme in the Plan cant be determined in advance. It will depened, amongst other things, on trends in international trade, on raw material availabilities and price movements. The Government intends to let the industrial pattern respond to market prices, not to trammel it by prescribing a rigid plan for industrial development. Nevertheless, .it is important to establish what industries c~ best be developed, and. to indicate where the national interest appears to he. The criteria used h drawing up the Second Flap and in determining which new industries should be established or which existing industries should be expanded us set out below. The order of presentation is, however, n ~tot be taken as indicating any order of priority.
(i) Industries have been favored which are expected to make the largest net contribution to national income per unit of investment. Indirect effects on income arising from purchases of goods and services from other industries or sectors have also been considered in applying this criterion.
(ii) Industries have been preferred which result in net increases of foreign exchange e d g s per unit of investment, taking into account the foreign exchange needed to establish the industry and the cost of fuels and raw materials which will have to be imported, or which, if not used in the industry, will be exported. Similarly, priority has been given to industries which can produce goods which replace imports and save foreign exchange.
(iii) Preference has been given to industries which use indigenous raw materials which otherwise would be under-utilized or wasted.
(iv) Provision has been made for industries which are expected to become important to the economy in the future even though their immediate contribution to income and employment per unit of investment may not be large for example, industries which produce certain types of producer goods. Which will have the effect of reducing the import component of future development expenditure.
(v) Consumer goods industries that produce necessities have been preferred to those which produce non-essential or luxury items, even increase where the latter may be very profitable.
(vi) Although fuler utilization of existing industrial capacity has, in general, been given preference over creation of new capacity or the establishment of new industries, in some cases complete utilization of capacity has not been aimed at because of large recurring foreign exchange costs, or insufficient demand for the products, or poor management and organization of existing units, or comparative non-essentiality of the goods produced.
It will be seen that the complexity of the problem of industrial development does not permit the application of any simple criterion, such as. Preference of heavy or producer goods industries over light or consumer . goods industries. It is secessary, however, that in view of the long-run. requirements, increasing importance should attach to producer goods industries, afid appropriately high targets have been set for development of such industries. At the same the, a substantial proportion of the development industry has been allocated to essential consumer goods food manufactwing, cotton ' textile and pharmaceutical industdes, to alleviate present shortages and meet increasing demand, But very little weight is given Yo non-essential new consumers goods haustry; and in line with the need for austerity, expected demand for a number of L consumers items is not to be met in full.
The strategy of the Plan is to encourage rapid growth of certain selected industries both through provision of liberal facilities to private industry and through public investments when necessary. At the same time, emphasis is placed on measures which geld quick results, notably through mobilization of existing skills. and entrepreneurial spirit amongst private businessmen. To achieve this end provision is made for modernization expansion on a modest scale of several existing industries. Policies and methods of implementing the industrial programme
The Plan follows certain priorities in deciding how much and by what methods to increase output of different industries. It also indicates certain policies with, respect to the relative importance of large and small scale industries, the location of industries, the choice between public and private enterprise and the encouragement of private industry. These are discussed below.
Increase of industrial output.-First priority is given to better utilization of existing capacity. To achieve this, it will be necessary to supply more raw materials, spare parts, power and other in uts to industries which, because of such shortages, have been operating be on capacity. Provision L has been made in the Plan for substantially increasing the total import of raw materials, fuels, and spares. The supplies to individual industries will be increased to the extent that expansion of production seems desirable or necessary. But other less obvious steps aiming at higher productivity in L the use of capital and manpower are equally important. Full and efficient utilization of capital equipment will have priority over saving of manpower but such utilization is only possible through the use of better-trained manpower. Measures to improve managerial and technical skills, to strangthen industrial schools, and to provide trading-within-industries will be undertaken. More stress will be placed on use of consultants in overhauling industrial operations. A necessary condition for the success of this approach, however, is that the less efficient of the existing units shall either be improved and consolidated or be eliminated.
Second priority has been given to balancing installed equipment, in some cases in individual units, but in others within the industry, by selective investments. There are many industrial units where production can be substantially increased through fuller utilization of the installed capacity if some additional investments are made.
Third priority has been given to modernization of existing units, 'where this permits better use of managerial talent, human skills, and available installations. This implies that modernization will not be attempted in cases where the units, apart from being inadequate technically are also badly managed and operated by poorly trained workers. The aim of modernization will be to make production more efficient, to encourage specialization and manufacturing of new products, and to improve quality.
Where the possibilities of expanding production without extensive investments are not present, expansion will be aimed at either through establishment of new units or through extension of existing units. In certain industries, however, existing units are poorly managed and of a low standard, although their capacity at least theoretically is adequate to supply existing markets. In such cases, it will be necessary to encourage new units in or ever to stimulate improvements in the industry as a whole. In other cases, where one single or a few Ws hold a dominant position in the market, establishment of other units may be appropriate to stimulate competition, if other economic considerations so permit. In the choice between expansion of existing units and establishment of new number of factors have to be taken into account. Expansion of existing units often will have economic advantages, which may-well be outweighed by advantages of locating new units closer to the market or to raw material resources, or in poorly developed areas. Nevertheless, paucity of trained personnel and heavy investment in overheads will, in many cases, necessitate emphasis on expansion of existing units even where new units may have other perceptible advantages.
Relative importance of large and small scale industries.-Consideration has been given in the Plan to the choice between large, medium sized, and small units. The assumptions of the Plan are that new, small and medium sized industries will be encouraged; that sub-contracting-which implies that some large scale industries will buy systematically from smaller units-will be fostered; that small industries with prospects of advantageous development will be assisted, but that the aim will be not to perpetuate an' uneconomic structure. The need for the most economic use of development resources in the country is so strong that resources cannot be wasted by promoting at all costs an industrial pattern dominated by small enterprises.
Limitations are imposed on the rapid expansion of small and medium- sized industries by market considerations, and by shortage of technical and managerial skills. That investment per worker is low in small units is true of village and cottage industries with limited growth prospects, but not of the great numbers of small units which will be required in a rapidly growing economy, like re air and small manufacturing shops. Even where investment per worker investment per unit of output may be as high as, OF higher than, in large scale industries. Finally, small units have certain inherent social disadvantages, such as low wages, primitive working conditions, and insecurity of employment. Nevertheless, in a country like Pakistan with a vast unemployed or under-employed population, there are countervailing social advantages in spreading industrialization through small units. The Plan, therefore, introduces a seEies of positive actions, discussed later" in this chapter, which should facilitate the growth of small and medium sized units. Where modem ,technology and large-scale operations are not dictated by over-riding technical and economic considerations, choice has been made in favor of small and medium sized units. Scope has beep provided expansion of industries where the capital-output ratio is low, or where much s about will be employed, or where expansion can as easily take place in small or medium sized units as in large ones. It is assumed that nothing will be done, on narrow social considerations, to prevent small and medium -sized units from growing bigger; this is how success industry enterprise has developed in industrialised countries. The reservation of some sectors of industry or some products for smd units will obstacles in the way of larger units, and must be made only with utmost care.
Location of industries.-During the past few years, establishment of industries in Karachi has been severely restricted, and expansion has not welcomed in certain districts of West Pakistan. The effort has been to establish industries in areas where little or no industry exisits. The effect of these limitations has been to discourage industrialization in those areas of the country, notably the large industrial centers, where new investments will become most fruitful, at least in the short run. These limitations will meet to be relaxed, and location of new capacity encouraged in all suitable areas. In this context it will be of advantage to provide the establishment of industrial estates in centres where the transport system, water and power resources, tilad availability of raw material and potential markets offer suitable opportunities. Apart from the la~gec entres, effort will be made, notably through the small-scale industry programme, to encourage smaller centers for industries which m d y supply local markets. Close co-operation will be necessary between authorities responsible for industrial planning and those dealing with urban and regional physical planning, in order to promote the dispersal of industries in suitable locations. BEY 21. Choice between public and private enterprise.-It is a basic assumplaion of the Plan that for the implementation of the industrial development programme, reliance will be placed primarily on private enterprise. This assumption has been made not so much to reduce the burden on public jinance as in recognition of the fact that private enterprise has a key role to play in the economic development of the country. Already the development of many industries is directly attributable to private enterprise. During the Plan period the private- sector is expected to expand more rapidly. For such expansion, a favourable climate now exists in Pakistan, and conditions are now present for in private investment, both indigenous and foreign. Price and distribution controls have been relaxed, and this trend is expected to continue. Incentives have been provided to stimulate production and exports. Incentives offered to foreign investors have been liberalized. Investment treaties and double taxation avoidance agreements calculated to promote private investment have been concluded with a number of counties, Locall private enterpries has now- acquired a measure of experience and how-how which qualifies it to expand its operation either Independently or in collaboration with foreign investors.
In several sectors of industry the choice may well arise between pubIic and private enterprise. The cardinal principle is that there should be mo public industrial sector in the sense of reservation of complete industry for public enterprise, but that the Government should remain generally responsible for promoting all industries by providing the required facilities, and should directly participate only in those enterprises which are essential for over-all development and where private capital is not forthcoming or - high considerations of national security intervene. Where the Plan provides for public investment in industry, it assumes that on present indications. the Government must initiate developmet of certain industries because private investment is not available. At present tliere is reason to believe that private capital may not be forthcoming in required measure to ensure a.satisfacto'ry industrial growth in East Pakistan, and some important industrial?
Ventures in West Pakistan also my have to be started by the the PIDC will, in such cases, take the initiative, In doing so the Corporation will, to the maximum extent possible, associate with itself such private enterprise as may emerge. The charter of the Corporation enjoins it to divest itself, at the opportune time, of its investment in the undertakings. that it promotes. This polic of disinvestment in projects competent private enterprise itself will be - recommended, however, that should at any time private enterprise be found ready and capable of undertaking any or all of the industrial investment indicated in the Plan for the public sector, there should be no hesitation inkc allowing the private sector to do so. Investments shown in the public sector are not excluded from the scope of private enterprise, either national or foreign, for the development of industries during the Plan period.
Proposals for the encouragement of private enterprise and opportunity for private enterprise are, however, not synonymous with unplanned growth. The following measures are recommended for the guidance and encouragement of private industries within the frameword of" the Plan :
(i) The recently created Investment Promotion Bureau will need be developed to an effective clearing house for, all problems which investors may face. The Bureau is design& to disseminate information on investment opportunities and conditions in Pakistan and offer advice and guidance to investors; and to+ help private investors in obtaining import licences, land, building. materials, technical. help or advice, and any facilities for whick the approval or assistance of the Central or Provincial Governments or statutory bodies is necessary.
(ii) Obstacles to new investment will need to be fewer reduced. Beginning has been made through the Industrial Investment. Schedule (published in Febntary 1960) with freeing investment: in identified directions from the need for obtaining prior government sanction, if the foreign exchqnge component of the investment can be- obtained from the Pakistan Industrial Credit and Investment Corporation or from export bonus earnings. The procedure for foreign private investment has been simplified-. Further Industrial Investmat Schedules within the framework of the Plan will need to be published periodically in the light of national re uirements and investment trends as they develop during the P 1 an period ; the aim will be to exempt as much investment as possible from the sanctioning procedures.
(iii) Industrial legislation will need to be rationalized for facilitating planned growth of industries, governmental regulation being concentrated on achieving an orderly growth of industries under socially acceptable conditions, and on resolving such conflict as may arise bemeen individual interests and priorities,
(iv) The we of price control will need to become an exception, emphasis being placed instead on increased production and ' more vigorous competition as a means of keeping prices at a reasonable level.
(v) Controls on the import of machine and raw materials will need to be fiuther simplified, and are practicable, specified machinery and raw materials freed from import restrictions. The volume of imports may be regulated by a system of import surcharges or other fiscal measures.
(vi) Exports will need to be further facilitated by suitable incentives- This is a continuing requirement.
(vii) Financial institutions will need to be strengthened to stimulate private industrial development, small industries being encouraged to avail themselves of cooperative credit facilities where feasible, A special programme of credit facilities will be inaugurated to this end.
(viii) The Government, in association with private enterprise and talent, will need to continue the provision of technical training, scientist and industrial research, series of apart consultants, and collection and compilation of statistics.
(ix) Special attention will need to be given during the Plan period to the preparation and publication of national standards by the Pakistan Standards Institution. The use of these standards will discourage the production of sub-standard goods for the domestic market, and will promote the acceptance of Pakistan products in foreign markets.
Training and research!-Training is operative for success industrial development. The Plan proposes the strengthening of vocation schools, and romotion of technical training within industrial units, private I as well as public. Institutes for techical education will be strengthened with emphasis being given to the improvement of existing institutes. During a transitional period students from regions with no suitable educational mtitutions will be given grants for travel and subsistence, 'from private and public sources. Special emphasis will be laid on training and education for management. Suitable courses in business management will be introduced in at least one university in each Province. For the training of existing management, the Government will support private efforts to establish an institute for management which will orggnke trainin progremmes and research into spec& management problems. Industry be given more facilities for training personnel abroad.
Promotion of science and technology on a broad basis must be an ihtegral part of any sound plan for the effective utilization of the natural and human resources of the country. In the industrial field, the need is for research in the name and use of raw material resources, and for development of new products, processes, and improved techniques for the most economic use of these resources. Some useful work in this -direction has already been done by the Council of Scientific and Industrial Research, and a number of new processes have been developed to a stage where they are ready for commercial exploitation*. Private enterprise will be encouraged to develop commercially the processes evolved. Present activities in scientific and industrial research will be expanded, where possible in association with private firms which are expected to help hance reserach of special interest to them. While a 'number of reserach institutions relative to industrial and other fields have been established in the country in recent years scientific research does not occupy the lace it desem in the deliberations Goverqment. There is nee B for coordination witdheoliubte raatdiomnisn iostfr attihvee centralization, of scientific research under a single Ministry, preferably the Ministry of Education. A Scientific Commission was established by the
Government in 1958 to study this question ; its report is still awaited.
26. The importance of technical and advisory services for the preparation of economically and technologically sound projects and for improving productivity, particularly in the private sector, cannot be over-emphasised. For this purpose it will for some time be necessary to employ foreign bdustrial consultants, but this can only be a, temporary expedient. The Govemnt will need to provide the necessary foreign exchange facihties, while encouraging the development of private industrial consultant and advisory services in the country. The Pakistan Industrial Technical Assistance Centres at Karachi and Lahore are already doing much useful work to promote productivity. The Industrial Research and Development centre, already sanctioned for East Pakistan, will be set dp du-ring the Plan period. To supplement research and advisory services, information ' on the latest technical discoveries and industrial devel~p~menttsa kin place in foreign countries should be systematically collected, assessed and & 'sseminated with the country. Assistance will be given to "libraries, - scientac institutions and other public and private agencies which engage in this work
Third Five Year Plan (1965-70)
The Third Five Year Plan was formulated within the framework of a Twenty Year perspective plan (1965-85), and in the light of the achievements and shortfalls of the two previous plans. The principal objectives and targets were to:
(1) Attain rapid growth in the national economy with a view to ensuring a breakthrough to self-sustained growth in the shortest possible time, by aiming at a minimum increase of 37 percent in the gross national product at constant prices. The annual rate of increase was projected at 6.5 as against the previous 5.5 percent;
(2) Reduce the degree of inter-regional and intra-regional disparity in income per head between East and West Pakistan by increasing their regional income by 40 and 35 percent respectively;
(3) Provide at least 55 lac new job opportunities to absorb increases in the labor force during these five years, as well as to reduce the existing level of unemployment by over one-sixth;
(4) Strengthen the balance of payments by increasing foreign exchange earnings at a rate faster than the GNP, and by accelerating import substitution; foreign exchange earnings were projected to reach Rs 480 crore by 1970 compared with about Rs 301 crore at the end of the Second Plan;
(5) Develop basic industries for the manufacture of producer goods so that the requirements of further industrialization could be met, mainly from the country’s own capacity;
(6) Accelerate the transformation in agriculture by giving the highest priority to measures designed to increase per acre yields and by maintaining strong farm incentives and subsidies to ensure maximum realization from farmers’ resources;
(7) Arrest the menacing growth of population through effective steps;
(8) Provide better housing, more health services, and greater facilities for education, especially for the lower income groups; and
(9) Make substantial progress towards certain specific social objectives such as diminishing inequalities in the distribution of income, wealth and economic power; providing a measure of social security; and promoting social and cultural change conducive to more rapid economic expansion.
The Third Plan envisaged a total outlay of Rs 5200 crore, Rs 3000 crore in the public sector and Rs 2200 crore in the private sector, with a view to maintaining a rising tempo of development and attaining its main objectives and targets. It visualized that, of the public sector outlay, Rs 1600 crore would be spent in East Pakistan and Rs 1400 crore in West Pakistan; the expected private investment of Rs 2200 crore would be shared equally between the Wings. In determining the size of this plan, due consideration was given to the expected availability of financial resources and the capacity of the country to implement the development projects and programmes effectively.
Soon after the launching of the Third Plan, it had to be reviewed in respect of its resources, priorities and phasing in the light of various adverse circumstances of nature, such as droughts in the West Wing, and floods, tidal bores and cyclones in East Pakistan. In addition, there was a reduced inflow of foreign economic assistance because of the postponement of the Aid-to-Pakistan Consortium meeting in July 1965, and the outbreak of war with India in September that year.
The re-phasing of the annual outlay during the remaining period of the plan, and the revised sect oral priorities and allocations, were directed towards maintaining its size, basic objectives and main targets. This re-phasing was primarily necessitated by a short fall in the public sector outlay in the first year, from Rs 470 crore to Rs 342 crore. The shortfall was to be made up by accelerating the rate of annual development expenditure which was revised to a higher level of 14 percent from the original projection of 11 percent per annum.
The re-phasing and inter sect oral adjustments announced in March 1967 reflected a new strategy for achieving the planned GNP growth of 6.5 percent per annum with a lower investment. This was sought to be achieved (1) greater concentration on agriculture, selected expansion of agriculture-based industries and provision of more incentives to farmers; (2) fuller utilization of installed capacity and subsequent consolidation of the existing units; and (3) improvement in the capital-output ratio by postponing projects with long gestation periods. The highest priority was accorded to the attainment of self-sufficiency in food during period. The original and the revised phasing the Third Plan in the public and private sectors is given in Table 2.
The Third Plan, with a Rs 5200 crore development programme, was the first within the framework of the Twenty Year Perspective plan (1965-85). It, however, witnessed a host of adverse circumstances and as a result achievements in most sectors fell short of expectations. Some of these factors were: increased expenditure on defense since the war with India in 1965, drastic cuts in foreign aid along with the hardening of the terms of loans and mounting repayment obligations, successive droughts and floods in 1965-66 and 1966-67 leading to a rise in food imports to be paid from the country’s own resources, decline in savings and investment, and a rise in the cost of living. Finally, socio-political unrest that gripped the country in the penultimate year of the plan caused widespread dislocation of economic activity, adversely affecting industrial growth exports.
The actual development expenditure was Rs 4294.9 crore against the target of Rs 5200 crore, indicating a short fall of 17 percent in the total programme. In the public sector, the development expenditure incurred was Rs 2143.3 crore against the target of Rs 3000 crore, showing a shortfall of 29 percent. In the private sector, total expenditure amounted to Rs 2151.6 crore, a slight decrease from the target of Rs 2200 crore.
The plan envisaged that 55 percent of the total expenditure in the public sector would be financed by domestic resources and 45 percent by external resources. Actually, about 52 percent of public sector expenditure was financed through domestic mobilization, and as such the projected ration between domestic and external resources was not fully realized. The expenditure on defense during 1965-70 was estimated at Rs 1238.4 crore as against the original projection of Rs 689 crore. The shortfall of Rs 757.7 crore in the revenue surplus was mainly accounted for by the unanticipated rise in defense expenditure. The short fall in revenue surplus was, however, counter-balanced to the extent of about Rs 344.8 crore through additional taxation over and above the target of Rs 300 crore. The total deficit financing during this period amounted to Rs 232.2 crore as against the planned Rs 150 crore.
There was a short fall of Rs 320 crore in external resources as a result of the postponement of the Aid-to-Pakistan Consortium in the very first year of the plan; the level of aid pledged and committed went down substantially. Though subsequently the aid flow was to some extent restored, this could counter balance the earlier shortfall.
GNP increased by 5.7 percent annually, agricultural production by 4.5 percent and export earnings by 7 percent, compared with respective projections of 6.5, 5 and 9.5 percent. Some other important targets were subject to more severe shortfalls. An annual growth rate of only 6.8 percent in value added in the manufacturing sector was realized, compared with 10 percent; prices increased by over 20 percent during the period.
A major failure of the third plan was reflected in a substantial shortfall in savings and investment targets for the economy, which in turn affected employment opportunities and allocations for social sectors. On the whole, investment in real terms barely showed any improvement. In nominal terms, the public sector development outlay of Rs 620 crore in 1969-70 was 27 percent higher than the level of Rs 489 crore reached in 1964-65. Allowing, however, for the abnormal increase in prices of investment goods, and a larger element of non-development expenditure on subsidies in later years, public investment in real prices remained at best constant. There was, also, no acceleration in private investment, which actually declined from 18.3 percent in 1964-65 of 13.5 percent in 1969-70. If depreciation and replacement requirements on large investment of the past were deducted from a declining gross investment level, net investment ratios were, in fact, even more severely affected.
Gross domestic savings increased from Rs 570 crore in 1964-65 to the Third Plan annual average of Rs 679 crore, but the average rate of savings deviled from 11.7 percent in 1964-65 to 9.7 percent in 1969-70. The marginal rate of savings over this period was a little more than 6 percent compared with the target of 20 percent. The value and structure of imports, the poor performance of the manufacturing sector and the increase in government current expenditure were major factors depressing the rate of savings.
Foreign exchange earnings increased at an annual compound rate of 7 percent as opposed to the estimated 9.5 percent, reaching Rs 425 crore in 1969-70. Total payments during the period were about 14 percent lower than original projections. The availability as well as utilization of external assistance fell short of expectations. The gross inflow was Rs 177.9 crore as against the target of Rs 1550 crore. The plan estimated a requirement of 2850 million in fresh pledges that is 2700 million from the consortium and 150 million from other sources. Total pledges made during the period were instead 2339 million, a shortfall of 18 percent. The commitments and disbursements were estimated to be 16 and 25 percent respectively less than planned expectations.
In the public sector, the total development expenditure to East Pakistan was estimated at Rs 1130 crore, and Rs 1023.3 crore in West Pakistan, with the private sector providing Rs 551.6 crore in East Pakistan compared to Rs 1600 crore in West Pakistan.
At the end of the Third Plan in 1970, twenty-three years of Pakistan’s existence had passed. Doubts about the country’s stability and continued existence had been allayed. It had even fought a war, which was a stand-off, with its powerful neighbor, India. The US made Pakistan the show window of its success in economic aid. The west believed Pakistan to be a country which knew how beneficial it was to be western protégé and not play with hazardous political and economic theories – not even with democracy, except in the very restrained manner of Basic Democracy invented by President Ayub Khan’s advisers. And yet, Hecate, Greek goddess of ill omen and the harbinger of all evil tidings, could hear then the rumblings of storms that began to gather in Pakistan’s political and economic life.
Fourth Five Year Plan (1970-75)
The fourth plan, for the years 1970-75, was drawn up against the background of his deepening crisis. Its strategy was fashioned keeping in view the following objectives, namely, to maintain the temp of development in the country; reduce inter regional and intra regional disparity in per capita income; and move towards a viable synthesis between the claims of rapid economic growth necessary, inter alia, for our existence as an independent nation, for social justice in terms of our Islamic ideals, and for the need to remove our internecine conflicts.
Some of the important targets of the Fourth Plan were to:
(1) Attain an annual growth rate of 6.5 percent of the GNP, which would permit the average per capita income to increase to at least Rs 660 in 1974-75; the target for East Pakistan in this respect was 7.5 percent per annum as against 5.5 percent in West Pakistan;
(2) Reduce the disparity in per capita income between various regions at the fastest possible rate;
(3) Provide 75 lac job opportunities compared to the 65 lac new entrants in the labor force;
(4) Increase exports by at least 8.5 percent annually;
(5) Reduce the country’s dependence on foreign loans, with net foreign assistance expected to finance only 15 percent of total development expenditure;
(6) Move towards a more equitable distribution of income and wealth by increased taxation of upper income groups, by fixing a minimum wage, by reducing the differences in the salary structure, and by greater emphasis on social security schemes;
(7) Increase the outlay on education 2 ½ times the level of the Third Plan, and enrollment in primary schools by five million, in secondary schools by one million and in institutes for technical education by 280 percent;
(8) Protect the entire population from malaria and small pox and to bring about major improvement in curative health facilities by providing 24000 additional hospital bedews and matching requirements of equipment and medical personnel;
(9) Construct approximately half a million housing units for low income groups; and
(10) Launch a major urban works programme to improve the environmental conditions in big cities and to cater to the community needs of the neglected areas.
The total size of the fourth plan development programme was fixed at Rs 7500 crore – an increase of 44 percent over the previous plan. 65 percent of the proposed plan outlay (Rs 4900 crore) was earmarked for the public sector while the remaining 35 percent was allocated to the private sector.
Unfortunately the Fourth Plan soon before irrelevant. It had been fashioned in the framework of a united country with emphasis on East Pakistan. The separation of Bangladesh in December 1971 rendered it in fructuous and inapplicable, and it was given up. Instead, the new government introduced a system of annual plans as the principal instrument for economic development.
IMPORTANCE ON INDUSTRIALIZATION IN 3rd ECONOMIC DEVELOPMENT PLAN (1970- 1975)
The strategy of industrialization for the IMd Plan flows inevitably from the lessons learnt from industry development in the last one and a half decade and the industrial great set for the next 20 years under the Perspective Plan. During the Second Plan period, the rate of growth of industry was about 8.6 per cent as against 3.5 per cent in agriculture. The Perspective Plan postdates growth rates of about 10 per cent and 5.6 per cent respectively in industry and agriculture. Of the planned increase in national income during the Third Plan period as much as 65 per cent is expected to be contributed by the non-agriculture sectors. Investment targets of the Third Plan envisage a marginal saving rate of at least 22 per cent. Past experience shows that the large scale industrial sector which saved and re-invested nearly 75 per cent of its profits was making a handsome contribution to the domestic savings effort. This implies that large scale manicuring must continue to be the leading sector in the economy to yield a marginal saving rate higher than the average rate for the economy. These basic parameters have been kept in view in formulating the industrial strategy for the Third Plan.
The first important element in the strategy of industrialization for the Third Plan is a shift in emphasis from consumer goods to capital goods industry to maintain the contribution of the industrial sector to the savings effort and to extend the import substitution programme over a much wider front. The domestic demand for many capital goods is now large enough to permit domestic.producttion on an economical scale and the country's long term objective of eliminating dependence on external assistance cannot be achieved unless more and more of the capital goods required for development are produced witbin the country. To achieve this shift successfully special attention will be paid to research and training to develop skills and technology necessary for the promotion of capital goods industry. Efforts will also be made to enlarge the size of the market for many of the capital goods industries through various biiteral or multilateral arrangements to promote the setfhg up of efficient and economic units.
The second importaat element of the strategy for industrialization is the policy of setting up of industries primarily for exports to achieve the country's export targets for the Third Plan and the 20 year Perspective Plan. The country's natural or acquired advantages in the export market have been carefully analysed in determhing industries which would be developed or expanded primarily for exports.
The major objectives of the Third Plan's Industrial Programme are mutually interdependent in the long run and all have high priority. An organized effort directed towards the achievement of these objectives requires that:
(i) industrial investment must be made at a pace and of a composition which will ensure that output goals are met and that industrialization contributes its share to the G.N.P. targets;
(ii) a beginning must be made with the setting up of heavy industries notably industries to produce machinery and equipment and other capital goods;
(iii) to produce and market at stable prices the essential consumer goods and services for domestic consumers consistent with and equitable distribution of income and the growing disposable income of wage earners;
(iv) to increase productivity of existing industries; and
(v) to provide maximum employment opportunities consistent with economic
The strategy of industrialization for the IMd Plan flows inevitably from the lessons learnt from industry development in the last one and a half decade and the industrial targets set for the next 20 years under the Perspective Plan. During the Second Plan period, the rate of growth of industry was about 8.6 per cent as against 3.5 per cent in agriculture. The Perspective Plan postdates growth rates of about 10 per cent and 5.6 per cent respectively in industry and agriculture. Of the planned increase in national income during the Third Plan period, as much as 65 per cent is expected to be contributed by the non-agriculture sectors. Investment targets of the Third Plan envisage a marginal saving rate of at least 22 per cent. Experience shows that the large scale industrial sector which saved and re-invested nearly 75 per cent of its profits was making a handsome contribution to the domestic savings effort. This implies that large-scale manufacturing must continue to be the leading sector in the economy to yield a marginal saving rate higher than the average rate for the economy. These basic parameters have been kept in view in formulating the industrial strategy for the Third Plan.
The first important element in the strategy of industrialization for the Third Plan is a shift in emphasis from consumer goods to capital goods industry to maintain the contribution of the industrial sector to the savings effort and to extend the import substitution programme over a much wider front. The domestic demand for many capital goods is now large enough to permit domestic. Production on an economical scale and the country's long term objective of eliminating dependence on external assistance cannot be achieved unless more and more of the capital goods required for development are produced within the country. To achieve this shift successfully special attention will be paid to research and training to develop skills and technology necessary for the promotion of capital goods industry. Efforts will also be made to enlarge the size of the market for many of the capital goods industries through various bitterly or multilateral arrangements to promote the shifting up of efficient and economic units.
The second important element of the strategy for industrialization is the policy of setting up of industries primarily for exports to achieve the country's export targets for the Third Plan and the 20 year Perspective Plan. The country's natural or acquired advantages in the export market have been carefully analysed in determine industries, which would be developed or expanded primarily for exports.
The major objectives of the Third Plan's Industrial Programme are mutually interdependent in the long run and all have high priority. An organized effort directed towards the achievement of these objectives requires that:
(i) industrial investment must be made at a pace and of a composition which will ensure that output goals are met and that industrialization contributes its share to the G.N.P. targets;
(ii) a beginning must be made with the setting up of heavy industries notably industries to produce machinery and equipment and other capital goods;
(iii) to produce and market at stable prices the essential consumer goods and services for domestic consumers consistent with and equitable distribution of income and the growing disposable income of wage earners;
(iv) to increase productivity of existing industries; and
(v)to provide maximum employment opportunities consistent with economic production.
The total figure of Rs. 4,470 million of public sector investment includes an investment of Rs. 250 million by the Central Government as shown below:
The country's potential fish resouroes are rich and abundant. As a result of Government's efforts to develop fish industry, the production of fish and its export has been rising continuously. Fish supply is expected to increase in the Third Plan period by about 35 per cent from 3.5 lac tons in 1964-65 to 4.7 lac tons by 1969-70.
At present about 47 thousand tons of &h is exported from the country. It is expected that this will increase almost thee fold by 1969-70. Keeping in view both the increasing local demand and exports, it is proposed to Create an additional capacity of 25,000 tons for canning and preservation of fish and ofber sea food in East Pakistan and 20,000 tons in We& Pakistan. $8. In addition to the canning, freezing, preservation and export of some of the fish, a proces evolved by the Pakistan Council of Scientific and Industrial Research for the production of fish liver oil, rich in Vitamin A, is in commercial use. Fish liver oil has a large export market particularly the Japan, Australia and U.K. Notwithstanding this possibility there is sizeable wastage of fish resources. During the Plan period the possibility of producing iish flour on a commercial scale to mix with wheat and rice flours so as to provide cheap but high protein diets will be explored.
The present fertilizer manufacturing capacity is rated at 550,000 tons in terms of Ammonium Sulphate 21 per cent nutrient (250,000 tons in Pakistan and 300,000 tons in West Pakistan) and 18,000 tons of single Superphosphate in West Pakistan. In addition a factory to produce 32,000 tons of triple superphosphate at Chittagong and the extension of the Ammonium Sulphate plant by 40,000 tons at Daudkhel in West Pakistan is in hand. Sanction has also been given to the setting up of a 170,000 tom urea (370,000 tons in tern of Ammonium Sulphate) by the private sector at Mari in West Pakistan.
The requirements of fertilizers in the light of the programme for the development of Agriculture and prospects for exports were subjected to investigations by a firm of consultants. .The prospects for the production of fertilizers were also examined, by the ConsuIfants in association with the authorities concerned.
During the Third Plan the expansion of fertilizer production @ will be of
the following order:
The projects for the setting up of the first Urea plant at Ghorasal in East Pakistan and the Triple Super phosphate plant at Khulna are ready for implementation. The U.N. Special Fund has accepted Government's request for assistance in the preparation of detailed feasibility reports for the projects and promotion work for the effective and better utilization of fertilizers. U.N. Special Fund experts are scheduled to start their work in the emendate future.
The production of fertilizers is projected, according to the programme stated above to rise to 2,500,000 tons in terns of Sulphate and 550.d tons in terms of triple super phosphate. In addition.@ beginning will be made with the production of complex O\TPK fertilizers in East:.Pakistan). During the Plan period is estimated at Rs. 1,400 million (Rs. 850,dIlion in East Pakistan a d R. 5% down West Pakistan)
Fifth Five-Year Plan (1978-83)
The Fifth Five-Year Plan marked the revival of medium term planning after eight years of annual planning characterized by institutional upheaval and great economic uncertainty. This plan was conceived as a comprehensive economic effort and its principal objectives were to;
(1) Meet the basic needs of the population and promote equity by providing essential consumer goods;
(2) Increase employment and incomes through rapid economic growth;
(3) Improve health, education, water supply and transport facilities in both urban and rural areas;
(4) Develop backward regions through the expansion of infrastructure and social and technical services; and
(5) Lay the foundations for long term growth by developing basic and engineering industries and technology.
The plan proposed to rely heavily on rapid growth to achieve these objectives. It emphasized the speedy completion of large on-going projects while shifting resources to priority areas of energy, agriculture, water, and the social sectors. An investment of Rs 210.22 billion was contemplated – Rs 128.22 billion in the public sector, Rs 62.00 billion in the private sector, and Rs 20 billion outside the Annual Development Programmes for the public sector. As such, the total public sector programme for the period 1978-83. Was approximately 70 percent of the plan size? Of the total public sector programme, agriculture got the largest share of 25.1 percent, 4.1 percent for subsidies on fertilizers and 13.4 percent for water. The power and fuel sectors were allocated 22.7 percent, transport and communications 16.9 percent and minerals 11.0 percent, and the remaining sectors received 24.3 percent.
Public sector investment during the Fifth Plan almost attained the projected level, and private investment exceeded its target by 20.3 percent in nominal money terms. However, in inflation adjusted real terms, public sector investment fell short by 33 percent whereas the private sector experienced a shortfall of 13 percent. The overall investment ratio estimated at 17.1 percent in 1977-78 was expected to increase to 19.9 percent by the end of the plan; it, however, declined to 16.1 percent in 1982-83. The failure to attain the investment target was mainly due to three factors. Firstly, the disruption in resource availability and higher project costs because of increased prices of raw materials, including oil and manufactured goods. Secondly, geo-political developments within the region forcing the country to accord priority to its defense, besides incurring expenditure on a large number of Afghan refugees. Thirdly, continued world recession, restricting the growth in exports of the country.
The shortfall in investment adversely affected the achievement of targets. GDP increased by 6 percent as against a target of 7 percent. Similarly, growth in the agriculture sector was 4.4 percent against the projected 6 percent, and manufacturing grew at 9 percent compared to a targeted rise of 12 percent.
In the power sector, the installed capacity of power generation increased from 3280 MW in 1977-78 to 4780 MW at the end of the plan; 8833 additional villages were electrified, bringing the total number of such villages to 16433. Crude oil production increased from 9900 to 14311 barrels per day. The production of natural gas increased to 338418 million cubic feet (MMCFT) as against the benchmark level of 199920 MMCFT. In the transport and communications sectors, 5257 kilometers of roads were added. The number of buses increased by 7341 trucks by 20510, telephones by 122000 and post offices by 1525. The population covered by radio broadcasting grew from 88 to 95 percent and television coverage from 74 to 82 percent.
The balance of payments position of the country showed a distinct improvement during the Fifth Plan period. The plan envisaged a real annual growth rate of 11 percent for exports, almost twice the level of expansion in imports, which were projected at 6.3 percent per annum. Nevertheless, since imports were over double the level of exports in 1977-78, the actual trade deficit was projected to rise from 1503 million to 1614 million by the end of the period. The current account deficit was expected to stabilize around $1 billion, with a substantial increase anticipated in home remittances from Pakistanis working abroad.
The Fifth Plan could not anticipate the rapid deterioration in the world economic environment which followed and, as such, the actual outcome of the balance of payments differed quite significantly from forecasts. Soon after the plan was finalized, the world economy witnessed rising inflationary pressures and mounting balance of payments disequilibria. Volatile fluctuations in the interest and exchange rates caused massive movements of speculative capital, and above all there was a rising trend towards protectionism. The sluggish growth in world markets causing contraction in world trade for the first time since 1958, along with a steep decline in the prices of primary products, drastically reduced export earnings of the poorer countries including Pakistan, and also caused a sharp deterioration in the terms of trade.
Although real exports grew faster than imports, the situation was reversed in nominal terms due to a sharp fall in the terms of trade. However, home remittances, an important constituent of invisible receipts, rose from 1156 million in 1977-78 to 2850 million in 1982-83, which helped to alleviate the situation.
Given the recessionary conditions of the world economy, real export growth of close to 9 percent was an impressive accomplishment. Imports, on the other hand, registered an annual compound growth rate of 5 percent against the target of 6.3 percent per year, reflecting major import substitution efforts in wheat, fertilizers, cement, sugar, iron, and steel and engineering products. The trade balance in real terms rose by just 1 percent compared with an annual increase of 1.4 percent envisaged, despite the pursuit of liberal import policy through out the period. Some restraint in the import volume could be attributed to de-linking the rupee from the US dollar on 8 January 1982. The managed floating exchange rate and the consequent depreciation of the rupee also provided a stimulus to export earnings.
On the fiscal front, there was some improvement. The consolidated fiscal deficit fell from 8 percent of GDP in 1977-78 to 7.1 percent in 1982-83. Government borrowing for budgetary support from the banking system also declined from 2.8 percent of GDP in 1977-78 to 1.7 percent in 1982-83. Non bank borrowing, however, financed 56 percent of the budgetary deficit in 1982-83 as compared to about 20 percent in 1977-78. Government revenues remained at around 16 percent of GDP. The government’s efforts to restrain public expenditure, and thereby cut the budget deficit, resulted in a significant reduction in development expenditure as a proportion of GDP, which fell from 10.5 to 7.7 percent.
An important achievement of the Fifth Plan was the decline in the rate of inflation which was brought down to 5 percent in 1982-83 from an average of 10.5 percent during the first eight years of the 1970s. This was possible due to higher real growth as well as better demand management, and improved international conditions.
IMPORTANCE ON INDUSTRIALIZATION IN 5th ECONOMIC DEVELOPMENT PLAN (1978-83)
The Fifth Plan offered the opportunity of drawing rational conclusions from the two distinct experiences of the past. The Government concluded after a careful examination that in a rapidly industrializing .economy, the public privae debate relates to only a marginal issue. By denatioalising the small agro-based units that should never have belonged to the public domain and opening nearly all spheres of economic activity to private sector, a start was made to provide a rational basis for choice in individual cases. The Fifth Plan stressed the completion of ongoing projects and the consolidation of earlier investments in the public sector while encouraging private investments to increase substantially and to play their full role in the development of the country. The ratio between public and private sector investment in manufacturing was expected to increase from 75 per cent share of the public sector to a rough parity. New investments in the public sector were restricted to balancing and modernisation of existing facilities and taking up only those new projects which were absolutely necessary for creating links to enable existing projects to utilise their capacity fully.
To increase the ratio of private investment, a number of export incentives were instituted. Import and foreign exchange rules liberalised; sanctioning procedures simplified; and a Government guarantee against further nationalisation was introduced. The size limit for units not requiring any sanction was raised. Complete or partial exemption from custom duty was granted for machinery imported for industries (i) of national importance
(ii) located in less-developed areas, and/or (iii) requiring balancing, modernization or replacement. Other incentives included tax holiday, accelerated depreciation, excise duty exemptions and export rebates. A wide area of industrial activity was thrown open to foreign investors and foreign investment was particularly encouraged in industries which required sophisticated technology and were highly capital intensive. A separate law was enacted to provide complete security to foreign 'capital and complete freedom was provided for repatriation of foreign capital and dividends from Pakistan at any time. The public sector units were weaned away from budgetary financing to start the process of bringing them at par with the private sector. Not the least, a system of credit allocation for the private sector was organised with the participation of a variety of institutions. Bankers Equity was set up to play a catalyst's role in overcoming financial problems at the initial stage of the project. NDFC has been allowed by an amendment of its charter to finance private sector projects.
The fifty Plan provided for an industrial investment of Rs. 40 billion at 1977-78 prices, of which Rs. 19 billion was earmarked for the private sector. In the public sector, 77 per cent of the investment (Rs. 16.17 billion) was provided for completion of 'ongoing7 projects and 6 per cent Rs. 1.26 billion) was for the tractor plants. The balance of 17 per cent in the public sector investment was to accommodate balancing and modernisation of existing units and a few small new projects. Due to a low base, private investment was projected to increase by 17.5 per cent annum whereas public investment was anticipated to show a slight declining trend. An evaluation of the period shows that public sector investment in nominal terms exceeded the planned outlays mainly because of the large escalation in the cost of Karachi Steel Mill (KSMj. On the other hand, private investment also exceeded the target. During the Plan period the policy package for the privae sector created a favourable response, which could not be fully translated into physical investment due to the limited availability of infrasturcture and other amenities. The policy package for the private sector was creating a favourable response, which could not be fully translated into physical investment due to the limited availability of infrastructure and other amenities.
During the period 1977-78 to 1982-83, the industrial sector experienced an overall annual growth of 9 per cent and the large scale manufacturing value added grew at an average of 10 per cent against the planned target of 12 per cent. Production in manufacturing in the public sector increased at a higher rate by 14.5 per cent per annum.
Investment in the manufacturing sector at 1977-78 prices declined by over 24 per cent i.e. from Rs. 8263 million in 1977-78 to Rs. 6256 million in 1982-83. This was mainly due to an attempt by the public sector to drastically reduce its commitments in this sector in line with the Fifth Plan strategy. Public sector investment by the end of the Plan period was reduced to less than half in real terms.
Sixth-Five Year Plan (1983-88)
The Sixth Plan was formulated against the background of the growth momentum established during the Fifth Plan. Its total size was proposed at Rs 495 billion which was more than twice that of the previous plan. Of this, Rs 295 billion was allocated to the public sector and Rs 200 billion for the private sector. The principal targets articulated were increases in:
(1) GDP by 6.5 percent per annum;
(2) Family income by Rs 900 per annum;
(3) Agricultural production by 5 percent annually;
(4) Industrial production by 9 percent annually; and
(5) Expansion in merchandise exports from an annual level of $2.43 to $4.91 billion by the end of the period.
Furthermore, it envisaged the creation of 4 million new job opportunities, the construction of 15,000 kilometers of new roads from villages to cities, the reclamation of 3 million acres of land for cultivation which had been destroyed by water logging and salinity, the reduction in the share of net external resources in the proposed gross investment from 24 to 16 percent, and a nearly four-fold increase in private savings. It also envisaged during the plan period a rise in the literacy rate from 23.5 to 48.6 percent, a reduction in infant mortality from 90 to 50 per 1000 and an increase in access to clean water from 38 to 60 percent of the total population.
The strategy of the sixth plan was succinctly summarized as ‘development of the people, by the people and for the people’. It stressed the importance of ensuring an equitable distribution of the fruits of development to the whole population, and not restricting it to a privileged few.
As regards the sectoral allocation of development funds, energy received the largest share, almost 20 as against 17 percent in the Fifth Plan. The share of agriculture including water, rose from 16 percent in the previous plan to 18 percent, while the share of social sectors, particularly education and health, rose from 7.5 to 11.5 percent. In financial terms, the allocations for these sectors were increased three-fold over the plan period.
So far as actual implementation was concerned; it was a qualified success. It maintained the momentum of growth established in the previous plan. External resource inflows made a significant contribution to its growth performance; these inflows financed about 20 percent of gross investment. As against the overall growth target of 6.5 percent per annum, the actual achievement was 6.2 percent. The annual growth rate in agriculture of 3.8 percent was considerably below the projection of 4.9 percent. Large scale manufacturing sector grew at an annual rate of 7.5 percent as compared to an expected 10 percent.
The energy situation improved, with electricity generation recording an annual growth rate of 13.6 percent. The increase in oil and gas production was also impressive. By 1987-88, oil production was 43,000 barrels per day as against the target of 21,000 barrels. The economy, however, suffered huge losses on account of load shedding.
In the social sectors there was modest improvement although most of the targets could not be achieved. The participation rate of children in primary schools went up to 63.5 percent as against the goal of 75 percent. The infant mortality rate was reduced from 98.5 to 80 per 1000 and life expectancy increased from 55 to 61 years.
The balance of payments position during the Sixth Plan highlights the fragility of Pakistan’s external sector. Remittances from the Middle East fell sharply from the expectation of 10 percent annual increase. A robust expansion of exports, however, compensated this adverse development, and the current account deficit of around 3 percent of GNP was not unsustainably high. The country, however, remained vulnerable to external shocks on account of its narrow export base.
A disconcerting feature of the performance of the Sixth Plan was the deterioration on the fiscal front. The plan had estimated net foreign resource inflows at $4.07 billion. Actual availability was around $2.8 billion. The shortfall in external resource inflows necessitated higher domestic borrowing. The government, however, failed to broaden the tax base and to improve its elasticity and equitable imposition, mainly on account of pressure from vested interests; it was very difficult to tax the prosperous elite adequately.
Because of pressures on expenditure due to mounting debt service obligations, increased defense allocations and inadequate revenue raising efforts, there was a steep rise in domestic debt. The high interest payments on domestic debt resulted in partly ‘crowding out’ private investment. In the Sixth Plan period, the government started borrowing not only to cover its development budget, but also its current expenditures. This fiscal position could not be sustained for long.
The Sixth Plan had laid emphasis on reduction in income inequalities. This objective could not be achieved, and, on the contrary, all available data points to its increase. However, the average income of considerable sections of the poor did grow on account of remittances from the Middle East. According to the Household Income and Expenditure Survey of 1986, the average income of the lowest 40 percent rose by less than 80 percent in nominal terms between 1979 and 1985. During the same period, the average for the top 20 percent rose by 94 percent, and that for the top 10 percent more than doubled.
Seventh Five-Year Plan (1988-93)
The Seventh Five Year Plan was prepared in the context of the Second Perspective Plan spanning the period 1988-2003. This fifteen year perspective emphasized efficient growth in output as well as improvement in the quality of life. Of the longer perspective targets, about 23.6 percent of GDP, 22 percent of investment, 23.8 percent of exports, 26.2 percent of imports and 21 percent of revenue, were envisaged to be attained during 1988-93.
The Seventh Plan had several basic objectives:
(1) The gradual elimination of unemployment, especially among the educated;
(2) Social and cultural development, with the main accent on the provision of food, housing, medical, and education facilities;
(3) Human resources development;
(4) Self-reliance by reducing dependence on external aid and by laying the foundations for long term growth through building technological skills, and investing in basic engineering industries and scientific and technological research;
(5) Maximizing the private sector’s contribution to growth and carrying forward the process of privatization;
(6) Reduction in fiscal deficits;
(7) Strengthening of the balance of payments; and
(8) Control of inflation through appropriate fiscal and monetary policies.
The original size of this plan was proposed at Rs 660.2 billion at 1987-88 prices, of which Rs 367.8 billion, or 55.7 percent, was for the private sector. The public sector allocation included subsidies and some other non-investment expenditures treated as developmental. The public sector investment programme was accordingly placed at about Rs 350 billion, which was subsequently reduced to Rs 322.95 billion on account of resource constraints.
The projected an annual GDP growth rate of 6.5 percent, which was to be sustained by an annual growth of 4.7 percent in the agricultural sector and 8.1 percent in the manufacturing sector. The other sector and 8.1 percent in the manufacturing sector. The other sectors were expected to grow at an annual rate of 6.7 percent. In view of the annual 3 percent increase in population, the increase in per capita income, on the basis of 6.5 percent annual rise in domestic output was projected at Rs 536 during the period compared to Rs 466 during the previous plan.
Table 4 shows the public sector development expenditures in the Seventh Plan and compares these with the development expenditures under the Sixth Plan. The share of agriculture and water in public sector allocations was reduced from 16.3 percent in the Sixth Plan to 13.5 percent. The energy sector allocation, however, was increased from 34.8 to 38.2 percent. There was a sharp decline in the share of industry from 5.3 to 2.8 percent. This of course reflected the government’s desire to assign a primary role to the private sector in industrial development. The expenditures on the transport and communications sectors, an important component of infrastructure, showed a small increase from 17.3 to 18.9 percent. A significant amount of Rs 25.3 billion was also made available in the Seventh Plan for special provincial budgetary development programmes.
The savings strategy of the 1988-93 plans envisaged a domestic savings rate of 12.6 percent of GDP and a national savings rate of 14.4 percent of GNP. Domestic savings in the previous decade had averaged only 8 percent of GDP. For a significant increase in the savings rate, the plan emphasized the reorganization of the capital market, reduction in fiscal deficits and the phasing out of subsidies.
As regards investment strategy, the plan envisaged a gross investment rate, including changes in stocks, of 16.6 percent of GNP, and a fixed investment rate of 15.4 percent. The share of external finance in total investment was, however, expected to decline from 18 percent in 1987-88 to about 11 percent in 1992-93.
With respect to external resource inflows to bridge the savings investment gap, the plan projected a requirement of $12.6 billion of which it hoped $10.2 billion would be received through official channels. In view of the un disbursed pipeline of $6.5 billion at the commencement of the plan period, it was hoped that an annual external commitment of $1.8 billion by way of aid and loans would ensure the availability of the required amount of external finance.
Unfortunately, the performance of the Seventh Plan was adversely affected by a variety of unforeseen factors on the domestic and international fronts. The Gulf War, the persistence of the civil war in Afghanistan, the breakup of the Soviet Union, recessionary conditions in Pakistan’s export markets, frequent changes of government within the country, an uncertain political milieu, civil disturbances in Karachi and other urban areas of Sindh, and the floods of 1988-89 and 1992-93, contributed to slowing growth in the country.
The overall growth performance, because of these internal and external constraints, was limited to 5 percent annually, agricultural production advanced at an annual rate of 3.8 percent, and manufacturing grew by 5.9 percent annually, while the plan had envisaged 6.5, 4.7 and 8.1 percent respectively. Other sectors moved ahead at an annual rate of 5.3 instead of the planned 6.7 percent. In aggregate terms, 74 percent of the output growth targets were realized.
On the external front, the current account deficit climbed from $1.68 billion in 1987-88 to $3.69 billion in 1992-93. The principal factor responsible for this adverse development was the decline in home remittances and higher payments for services. The deterioration in the current external account occurred despite massive depreciation in the external value of the rupee. The rupee-dollar exchange rates fell from Rs 18.12 per dollar in July 1988 to Rs 27.15 in June 1993.
On the fiscal front also, the hopes visualized were not realized. Targets in respect of additional resource mobilization and the containment of current expenditures could not be achieved. Table 5 depicts the trends of fiscal deficit as a percentage of GDP.
As a consequence of these unsustainable deficits, the domestic debt increased by almost 109 percent – form Rs 290 billion in 1987-88 to Rs 605 billion in 1992-93. At the same time, inflationary pressures during this period assumed uncomfortable proportions. This was primarily due to higher than planned expansion of monetary assets which registered an annual growth of 15.2 percent instead of the target of 12.5. The increase in domestic credit was Rs 326.7 billion, which exceeded the projection of Rs 179.9 billion by a wide margin. The main cause of excessive credit expansion was budgetary support provided by the banking system to the government, which amounted to Rs 175.6 billion as against the plan target of Rs 51.7 billion.
Table 6 sets out changes in the twelve-month averages of the Consumer Price Index (CPI) and Sensitive Price Index (SPI) for the five years of the Seventh Plan.
The Seventh Plan was some what ambitious in its targets, particularly regarding growth and resource mobilization. However despite many internal and external constraints, it achieved respectable growth in output during the first four years. The impetus in GDP growth slowed down in the fiscal year, 1992-93, to 2.3 percent due to floods and crop failures. As a result of widespread flooding in the cotton and wheat producing regions of the country, and the subsequent infestation of the cotton crop by curl virus, agricultural output declined during the year by 5.3 percent; in fact, this was the first negative growth in the agricultural sector since 1983-84. Growth in the manufacturing sector also showed to 5.4 percent as a result of damage to the cotton crop, which affected the textile industry.
During the Seventh Plan period, Pakistan began to implement a policy of privatizing government owned entities. The Privatization Commission was established in January 1991 and has continued to carry out this programme despite numerous changes of government and personnel manning the Commission. The main objectives of the privatization policy of successive governments have been to reduce the demand on government resources, curtail the size of the public debt, raise funds for priority sectors, improve the efficiency of the economy through the sale of state-owned enterprises and stimulate foreign direct investment.
This period also witnessed reforms in the financial sector which were introduced in 1989 following the government’s loan agreement with the World Bank. As a result of these reforms, government borrowing from the banking sector is now based on market related rates. Commercial and investment banking has been opened to the private sector and government has embarked on a programme of privatizing nationalized commercial banks. To date, two of them have been privatized. With the government borrowing at market rates, and the reduction of flows of subsidized credit, the distortions previously affecting the credit market are being phased out. Along with these reforms, the powers of the State Bank of Pakistan and the Corporate Law Authority have been enhanced through the grant of autonomy in the discharge of their functions.
Eight Five-Year Plan (1993-98)
The Eight Five Year Plan was prepared within the framework of a Fifteen Year Perspective Plan covering the period 1993-2008. The Perspective Plan had a long term vision for the country based on national objectives and the aspirations of the people. The distinguishing features of the Eight Plan included a sharper focus on policy initiatives, on the management systems, on the need for selectivity in sectoral programmes and on an express recognition of the fact that consolidation and rehabilitation of the political and social infrastructure is as important as new investment.
Its proposed size at 1992-933 prices was Rs 1700.5 billion, representing an increase of 48 percent over the estimated actual outlays of the Seventh Plan. Public sector development expenditure was projected to climb by 36.1 percent, and private fixed investment by 59.1 percent, compared to the previous plan. The relative size of the Sixth, Seventh and Eight Plans are set out in Table 7.
The Eight Plan carried forward the shift in investment from the public to the private sector. It proposed a public sector development (PSDP) of Rs 752.1 billion. In addition to the capital formation component in PSDP, the public sector allocation also included fixed investment by local bodies and financial institutions, as well as some elements of current expenditure.
The growth target envisaged an annual increase of 7 percent in domestic output, supported by an annual increase of 4.9 percent in the agricultural sector, 9.9 percent in manufacturing and 6.7 percent in services. The plan hoped to achieve its proposed growth target in milieu characterized by equity, stability and sustainability. For ensuring this, it aimed at reducing the fiscal deficit to half, from 8 to 4 percent of GDP, and to bring down the current external account deficit from US $ 3.7 billion to US $ 1.8 billion, that is from 7 to 24 percent of GDP. It also proposed to restrict long term external debt to 36 percent GDP and keep monetary expansion below the nominal growth of GDP.
The other important macro-economic objectives of the plan included reduction in the rate of inflation from 9.3 to 6 percent, a rise in the national savings of GDP ratio from 13.6 to 18 percent, significant reduction in the dimensions of high cost debt by the utilization of privatization proceeds for this purpose, and the generation of 6.2 million new jobs as against 3.2 million under the Seventh Plan.
The Eight Plan emphasized the importance of good governance for realizing its development objectives and targets. It sought to ensure equality of opportunity through merit, transparency, access to education, access to health care and vertical mobility. It also proposed decisive action against defaulters of tax, bank loans and utility bills.
Poverty alleviation has been assigned a high priority in the 1993-98 plans. It recommended long term measures through the Social Action Programme (SAP) and by the initiation of schemes for targeted groups such as Zakat, Baitul Maal, food stamps and self-employment. It was also ambitious in the social sectors. It proposed an increase in the participation rate for boys at the level of primary school education from 85 to 95 percent and for girls from 54 to 82 percent. In the health sector, it envisaged full immunization of mother and child against preventable infectious diseases. Life expectancy, the plan hoped, would to up from 61.5 years is 1992-93 to 63.5 in 1997-98. The lowering of the population growth rate was one of its primary objectives, aiming at reducing it from 2.9 to 2.7 percent between 1992-93 and 1997-98 and 2.6 percent by 2000. The main focus of the population welfare strategy was to expand the coverage of the population from 20 to over 80 percent, and to improve efficiency in implementation.
In the energy sector, the Eight Plan proposed to increase power generation capacity from 9786 to 16422 MW, gas production by 38 percent, refining capacity by 183 percent, and oil production from 60000 to 123300 barrels a day. An important target in this sector is the electrification of 19700 villages.
The Eight Five Year Plan is now in its fourth year. Recently, an official midterm review for the period 1993-96 has been released by the Planning Commission. It paints a discouraging picture of the economic performance during these three years. The overall growth of the economy has been well below the stipulated target. Moreover, the pattern of growth and investment, its financing, the mobilization of domestic resources, progress on the path of self-reliance and the pace of privatization have all been at considerable variance with targets visualized.
During the first years of the Eight Plan, GDP grew at an average annual rate of 5 instead of the 7 percent target. The performance of the agricultural sector registered an annual growth rate of 5 percent, just above the target. The record of the manufacturing sector however was quite disappointing as its annual growth rate of 4.5 percent fell below the planned 9.9 percent. The large scale manufacturing sector grew at only 2.6 percent per year compared to the target of 10.5 percent. This was partly due to delay in the completion of new projects which were envisaged to enhance the productive capacity of this sector, and also because of the unsatisfactory law and order situation in the country in general and in Sindh in particular.
As industrialization has a crucial role in accelerating growth and in strengthening balance of payments, its lackluster performance in the first three years of the Eight Plan is a matter of deep concern. The shortfall experienced in these years is unlikely to be compensated in the remaining two years on account of capacity constraints, aging capital, high interest rates, lack of demand both at home and abroad, and the transition from very high protection to a relatively less protective milieu. The performance of the construction sector during the first three years was also quite disappointing; its annual growth rate was 2.4 percent as against the plan of 7 percent.
It is heartening to note, however, that the electricity and gas distribution sectors achieved an annual average growth rate of 9.2 percent during this period as against the targeted 7.8 percent. As regards the services sector, its performance was almost in line with realized rate of aggregate growth of the economy. It achieved an annual advance of 4.7 percent as against the planned 6.7 percent. Within the services sector, major shortfalls were experienced in trade, transport and communications, public administration and the defense sub sectors. The sub sector of financial institutions and insurance, and ownership of dwellings, however, achieved their targets.
The tempo of investment activity in the economy during the first three years of this period was disappointing. The growth rates in total fixed investment as well as in the public and private sectors were 4.6, 1.8 and 7.1 percent respectively. The total investments of Rs 255.7 billion in 1993-94, Rs 260.1 billion in 1994-95 and Rs 294.0 billion in 1995-96 (at 1992-93 prices) were below their respective targets of Rs 276.3 billion, Rs 304.5 billion and Rs 338.0 billion. As such, total fixed investment at 1992-93 prices remained 11.9 percent short of the planned target. Private sector investment during 1993-96 stood at Rs 439.8 billion in 1992-93 prices, which represented 46.4 percent implementation of the fixed investment target for this sector. Moreover, public sector fixed investment during the first three years of Rs 370.0 billion at 1992-93 prices was 10 percent below the expected Rs 411.3 billion.
The share of national savings in total investment during the first three years was 70 percent as against the target of 83.3 percent, while that of external resource inflows was 30 percent instead of the projected 16.7 percent. Another disconcerting feature of economic performance during 1993-96 was the decline in national savings as a percentage of GDP from 13.6 to 12.4 percent.
Fiscal performance during the first three years of the plan showed mixed trends. Total revenues which were projected to increase from 18 to 19.8 percent of GDP have, in fact, averaged 17.3 percent. The government has, however, been able to reduce its expenditure by 2.8 percent of GDP. The overall fiscal deficit has been brought down from 8 to 6.3 percent of GDP in the third year.
Monetary expansion during 1993-96 was significantly higher than the projected annual 12 percent. The actual expansion during 1993-94, 1994-95 and 1995-96 and 16.9, 16.6 and 14.9 percent respectively. This was due to excessive government borrowing for budgetary support and to build up foreign exchange reserves.
Monetary ecstasy, lower than projected real growth and persistent depreciation in the external value of the currency resulted in unleashing uncomfortable inflationary pressures in the economy. The rate of inflation, as measured by the GDP deflator, has averaged 12 percent during the first three years compared to 6.5 percent envisaged in macro-economic projections.
With respect to the balance of payments, the cumulative deficit on current account in nominal dollar terms exceeded the plan target mainly due to deterioration in the trade exceeded the plan target mainly due to deterioration in the trade account. Export (fob) during the first three years increased on an average by 8.9 percent per annum as against the target of 12.5 percent in nominal dollar terms, while at the same time imports (fob) rose by 7.1 as against an expected 7.5 percent. The cumulative deficit in the trade account surpassed the target by 70.02 percent.
The invisible accounts, however, showed a marked improvement. A significant increase in the inflow of foreign currency accounts (FCAs), coupled with a moderate decline in invisible payments, and reduced the cumulative deficit on the invisible account to $932 billion as against the projection of $2116 million. Consequently, the current account deficit was contained at 4.8 percent of GDP as against the plan figure of 3.9 percent.
The achievement on the external capital account was quit heartening. The long term net capital account was quite heartening. The long term net capital inflows exceeded the target by a significant margin because of a sharp increase in the inflows of private long term capital. Foreign investment, both direct and portfolio, increased from $443 million in 1992-93 to $1296 million in 1995-96.
A welcome feature of the Eight Plan during three years was the successful completion of Phase I of the Social Action Programme in 1995-96. During the period 1993-96, 13356 primary schools were opened 5794 buildings for shelter less schools were constructed and 6319 additional classrooms have been added to the existing primary schools. In primary health care, 141 basic health units (BHUs), 111 urban health centers and 100 rural health centers (RUCs) have been constricted, while 805 BHUs and 104 RHCs were upgraded. 14.4 million Children have been immunized, 14546 traditional birth attendants were trained, and 40200 lady health workers were recruited, trained and deployed. The population welfare, programme during 1993-96 concentrated on both the construction and expansion of services, which increased by 50 percent, while a contraceptive prevalence rate of 22 percent was achieved. In rural water supply 55 percent, and in sanitation 23.3 percent of the population was covered.
The performance of the economy during the first three years, 1993-96 has been generally lackluster. Only about 52.2 percent of the gross domestic product, 48 percent of investment and 39.1 percent of national savings targets have been realized. To achieve the Eight Plan GDP growth target, the economy will require an annual growth rate of 11.5 percent during the remaining two years, which appears highly unlikely. This would require agriculture growing annually by 4 percent manufacturing by 21.6 percent, construction by 21.8 percent and commerce by 17.1 percent.
Despite significant improvement in the provision of social services, and the reduction in rural-urban disparities, structural changes and stabilization programmes recommended in the plan have not been effectively implemented. Un employment and inflation also remain problems of grave concern.
Trade 8 sets out the GNP of Pakistan, the contribution of the various sectors to the economy and the sectoral growth rates for the ten years 1988-89 to 1996-97.
Government spokesmen have painted a grim picture of the performance of the economy during the current fiscal year 199697. According to indications, the GDP growth rate is likely to be about 3 per cent as against the target of 6.3 per cent. Growth in the important sector of agriculture would in all probability not exceed I per cent because of declines in the output of cotton, wheat and sugar cane as compared to the previous year. The projection for agriculture for the current year was 5 per cent growth.
The manufacturing sector is expected to register a negative growth of 1.4 per cent in large scale industry, and not the positive target of 7.2 per cent. An equally gloomy picture is provided by the country's balance of payments. The current account deficit for 1996-97 is estimated at $4.5 billion or 7 per cent of GDP as against the target of 3 per cent recommended by the International Monetary Fund. The budget deficit at the end of June 1997 is going to be over 6 per cent of GDP as against the target of 4 per cent, primarily because the increase in tax revenue has been significantly below budget projections. Inflation during 1996-97 as measured by Combined Consumer Price Index is now forecast at 12.5 per cent as against the target of 8.5 per cent, and 10.8 per cent in 1995-96.
Despite these gloomy indicators, the plan for 1997-1998, the terminal year of the Eighth Five-Year Plan, has envisaged a GDP growth rate of 6 per Cent, inflation at 9 percent and investment to grow to Rs.330.8 billion. The overall growth .rate of 6 percent is planned to be achieved as a result of 7.2 per cent growth in manufacturing, 5.1 per cent in agriculture, 6.5 per cent in electricity and gas, and 5.9 per cent in the services sector. These optimistic projections for 1997-98 are based on the assumption that the economy would respond positively to the various economic revival packages of the recently elected Nawaz Sharif Government. The task of appropriately handling the short and medium term stabilization of the economy is a formidable one. The recent economic experience of a number of developing countries clearly demonstrates that structural reforms designed to revitalize the economy do not work in the presence.
Role of Public sector in industrial development
The role of public sector in industrial development of Pakistan was initiated with the establishment of Pakistan Industrial Development Corporation in 1952. the corporation was assigned the task to lead the private entrepreneurs and shake off their initial hesitation, the corporation in this regard invested in fields where private entrepreneurs were not taking interest due to lack of experience, expertise and too many risk in huge investments.
PIDC played a vital and pioneering role in establishment of industrial base in Pakistan. It set up crucial industries in these fields where capital was very shy and projects involved huge investments. it also setup industries in backwardness of the country for creating employment opportunity and reducing of regional disparities.
PIDC by June 1970 had successfully set up 60 industrial and mining projects with a capital outlay of Rs 1227 million. the main industries which the PIDC completed and transferred to private sector.included fertilizer, electricity, sugar mills, textiles, papers boardand news print, wollen mills and distribution of gas.
when certain projects become operatioinal and gaining profits it was handed over to private sector. The financial resources thus obtained where utilized in establishing new projects for private sector. hence the publicsector did not filled gap created by the private sectors but also provided a launching PAD to take off the private sector. In fact the public sector with the help of PIDC acted as an innovator. it share in total industrial investments at the end of 1959-1960.
Industrial Development Bank of Pakistan
IDBP is one of Pakistans’ oldest development financing institution created with the primary objective of extending term finance for investment in the manufacturing sector of the economy. Over the years, however, the Bank has emerged as an institution fostering the growth and development of SME sector stimulating industrial progress in the rural/less developed regions of the country besides offering lucrative opportunities to the house-holds and institutions for the investment in its deposit schemes. IDBP has also become an important component of the financial sector of Pakistan and is playing an active role in money and capital market of the country.
For attaining its objectives, the Bank provides medium and long term finance in local and foreign currencies for the creation of fixed assets to new industrial projects as well as for expansion, balancing, modernization or replacement of existing projects. It extends technical, financial and managerial advice to its clients in planning and execution of the industrial projects. It also facilitates transfer of technologies from developed countries to industrial enterprises in Pakistan.
IDBP is wholly owned by Government of Pakistan with 57% of its shares held by Federal Government, 36% by State Bank of Pakistan and 7% by Provincial Governments and other Public sector corporations. Its Board of Directors consisting of the representatives of private sector is appointed by Ministry of Finance, Government of Pakistan.
A unique feature of IDBP is that besides Development Financing Institution it is also a scheduled bank and authorized dealer of foreign exchange. Thus IDBP extends all kinds of merchant, investment and commercial banking services to its clients which include provision of short term advances, trade financing, lease financing, guarantees and under-writing. Thus IDBP operates a full-fledged Bank in addition to its role as a development financing institution.
IDBP has the unique distinction of financing the first ever projects for a diversified list of products. These include UHT pack milk, three wheelers, radio/wireless receiving sets, marble processing, coal mining, granite, acetic yarn, PVC deep sea fishing etc. The projects implemented through IDBP’s financing generated over 100,000 new jobs and have an export potential of about Rs.8.00 billion per annum. The value addition by the completed project is estimated at about Rs.15 billion per annum.
SARHAD DEVELOPMENT AUTHORITY
Pakistan Initiative for Strategy Development and Competitiveness
A joint SMEDA-USAID sponsored Public-Private Dialogue on Competitiveness was conducted over an eight-week period (May - July 2004) in which sessions were held with stakeholders of all important SME clusters in Pakistan. The purpose of the dialogue was to stimulate debate by leading a focused discussion that sought to identify global trends in innovation and investment the two drivers of competitiveness in key industry sectors. Business champions in each region and from key SME sectors and others were brought together in a series of workshops to identify trends in innovation and investment in the global markets within each sector. The implications of these trends were considered illustratively in terms of four areas of relevance; human resources, research and development, infrastructure, and management. From this discussion, the dialogue was developed into one that identified priority areas for business and the policy community. More than 300 people participated in 15 workshops held all over Pakistan. The sectors covered during this exercise included gems & marble, agro-processing, dairy, information technology, food processing, light engineering and fisheries. This exercise has provided valuable insight into the problems and challenges currently being faced by SMEs in Pakistan. The major findings include
- Lack of up-to-date Information about target markets, inputs, policies, regulations, etc.
- The role of the trade/industry associations is not properly understood. Hence the associations are not able to effectively promote the interests of their members.
- There are weak linkages between Industry and Academia. (This also affects the quality of HR being produced).
- There is an across the board need for testing, accreditation facilities for inputs/raw materials & products.
The objective of the PISDAC Project is to support self-selected Pakistani industries in developing strategies for upgraded production. The goal is to help institute a self-sustaining process by which such industries organize themselves to increase their productivity. In particular, the Project will work to help the industries organize, plan, and implement actions to increase their competitiveness. At the conclusion of the project
- The selected industries will have developed better strategies for upgrading industrial production.
- Leaders in these and other industries will be able to identify sources of funds, private and public,
- To implement these strategies.
- Public -private dialogue on competitiveness and the role of the public sector will be more effective.
- Industries, independently and in concert, will be able to identify specific reforms that could improve the ability of Pakistani small and medium enterprises to expand and/or increase profitability.
- Training providers, including universities, will be more capable of meeting the changing needs of the labor market.
Currently the project is working with the stakeholders from the Dairy, Marble & Granite, Gems & Jewelry, and the Cotton sectors.
PICIC, after turning the corner, is now destined to revive its glory through dynamic business activity which includes:
- enhancing recovery of loans
- resource mobilization for on-lending
- revival of sick units
- out of courts settlement even in the cases under litigation
- fund management and
- expanded merchant banking operations
- growth in lease financing
With all such activities, PICIC has started to earn sizable profit, and has started to pay dividend to its shareholders. PICIC has reemerged as a viable financial supermarket. The scope of PICIC financing which was previously confined mostly to providing long term foreign and local currency assistance for setting up industrial ventures has been further expanded to encompass provisions of other credit facilities and services. Commensurate with the growing competitive business environment, through the acquisition of a commercial bank. PICIC has realized that in order to meet the challenges of future specially the Third Millennium, PICIC needs to diversify from its traditional role of provider of subsidised credits to sub-borrowers. Realizing this PICIC is diversifying itself with the changing financial and operational scenario; it has to readjust itself into a financial institution which covers a wide variety of business operations. With the privatization process in vogue and development of a free market economy, the rules of business are substantially changing. The era of subsidised credits has been substituted with real market forces requiring effective and efficient ability to conduct into the new business order. PICIC is presently exploring the possibilities of new business areas as part of its diversification plan.
As a member of World community of development partners, PICIC is also deeply concerned with international agenda like Environmental Protection. PICIC is keen in pursuing to augment efforts in this direction. For the purpose of environment protection specially in the area of industrialization process where environmental threats are more common in the shape of air and soil pollution and threat to human health. PICIC is also concerned with the increasing global realization of quality standards. PICIC's lending policy is being further improved to support industrial production process in conformity with the ISO standards. PICIC itself is keenly interested in following a path which leads to its ISO certification as a financial institution in near future.
- New Business Areas Under Consideration
- Establishment/Purchase of Brokerage House (to undertake securities brokerage activities specifically for
- local and foreign institutional investors).
- Full fledged participation in Commercial Banking.
- Establishment of a Fund Management Company.
- Investment in Modaraba Capital.
- Purchase of Insurance business.
- Custodian and Trusteeship Activities.
- Floatation of Bonds/TFCs.
- Foundation of a University in affiliation with an “A” class AmericanUniversity.
- Consolidation and strengthening of existing activities.
- Enlargement in the scope of short-term financing, such as:
- Providing assistance for working capital against liquid security like bank guarantee and deposits of various approved securities.
- Loan Syndication
Export and import financing.
Role of Public Private Sector in industrial development
Pakistan is one of the countries hosting a UNIDO Country Office. Established in 1968 and located in the capital city, Islamabad, the UNIDO Country Director (UCD) Pakistan office has extensive and successful experience in industrial development cooperation. This experience has been gained through a continuous interaction with the public and private sectors, and by implementing over 50 projects covering many industrial sectors. A general feature of all these projects was and still is, that they are aimed at building indigenous (human and/or institutional) capacity to enhance the industrialization process of Pakistan in a sustainable way. As of today, a strong need for UNIDO’s services persist, which shows from 20 on-going projects and an ever-increasing flow of new requests for UNIDO’s services from both public and private sector. Requested services concern technical assistance through projects, but also fellowships, industrial information on investment opportunities, new emerging technologies, statistics, potential industrial partners and so forth.. Since UNIDO is a technical implementing agency and as such does not administer project funds, granting these requests does not always lie within the direct control of UNIDO. However, UNIDO will always strive to provide (or facilitate the provision of) the requested services to the maximum of its abilities.
To ensure the most effective fulfillment of its mandate to support sustainable industrial development in Pakistan, UNIDO will have to focus its activities to the most pressing needs of Pakistan’s industrialization process. In this connection two focus programme areas are being distinguished: Direct Technical Assistance and Investment & Technology Transfer.
Simultaneously, UNIDO Pakistan will have to adhere to a global restructuring process, which aims to enhance the overall effectiveness of UNIDO. One of the main features of this restructuring process, which has a direct bearing on all country offices, is the increased physical and programmatic emphasis on Regional & Inter-agency cooperation
Textile Industry Development Association:
The Pakistan Textile Engineering Sector is underdeveloped and under utilized. Mostly it caters in the form of spares, components for modernization and machines used in cottage or small scale industries.
A cursory look at the structure of Pakistan Textile Industry shows that most of them are cottage industry, small/medium industrial units and few large integrated states of art units. The number of units which fall under each category varies from sub-sector to sub-sector. Similarly the Textile Engineering Units also vary from small, medium and large in size. The Textile Engineering Industry comprises approximately 80% small work shops, 15% medium engineering Units and 5% large Engineering Units. It will not be out place to mention that the large engineering units are in Public Sector. The small and medium Engineering Units work on reverse Engineering principles, only few work according to Engineering Drawings and still fewer have Testing or Quality Control facilities.
On the basis of initial survey of Textile Engineering Units (Not complete yet), approximately 500 units are engaged all over Pakistan, employing approximately 50000 work force which is mostly skilled. Even under the present conditions and without any support, Pakistan Textile Engineering Industry is providing import substitution worth around one billion US dollars. This sector also exports to small and medium Textile Units in Bangladesh, Iran, Sri Lanka, etc.
The Textile Engineering Sector is throttled through taxes on raw material, import of components, electronic and electrical parts.
The present Textile Engineering Industry is up against competition from smuggled, under invoiced, and mis-declared components, parts and accessories. For example, in case of second hand machinery, there is little or no check and the competition mainly rests on lower price. Machines smuggled especially from China, India, Taiwan are not better in quality but are selling cheaper. A bold initiative is needed which can boost the production as capacity and markets are there, only change in environment is need.
The products manufactured locally, when displayed against foreign goods - offer a poor look – primarily because of the unsightly finishing of welding seams, electroplating, painting and other surface treatments. In addition, the adoption of wrong design parameters, or the attempt to reduce the cost of production, lead to the incorporation of under-sized electrical motors and electric / electronic control panels.
There are very few units which have their own material testing facilities, or have an access to any such service from out side. Although reverse engineering is practiced, yet this copying is done without adequate material testing. This results in poor quality or in many cases in an undue over - engineering. A great stress on quality control is being laid by all the major importing countries, especially in the wake of ISO 9000 series. There is, therefore, a need of assisting the local textile engineering the relevant institutions, such as PSI, NPC, CTL, etc.
To encourage the local textile industry an access to the modern practices in the specialized areas of manufacturing processes, productivity enhancement and quality control, an institutional mechanism should be set up which provides the industry an adequate and industry-friendly assistance from such organizations as MIRDC, PITAC, CTL and PSI, etc. In addition such institutions as Pak-Swiss Training Centre and Pak-German Training Centre, as well as the Small Scale Industrial Estates should be encouraged to provide the industry necessary technical assistance and production aids such as tools, jigs, fixtures, gauges, etc. for productivity improvement and quality control.
Keeping in view the linkage of the Engineering Sector to other sectors of economy, it can be safely assumed that every one person employed in Engineering will add at least 2 more persons in the over all economy. There is ample scope for qualified engineers in mechanical, electric and electronics disciplines to boost this sector.
Diploma Level Courses on the pattern of Pak-Swiss Training Centre in Karachi should also be opened in the Textile Institutions in Faisalabad and Karachi and more such courses should be introduced in the Polytechnics in areas like Multan, Hyderabad, Lahore and Gujranwala.
Most of these small workshops are shy or afraid of getting registered or displaying their products, mainly from the fear of the revenue collection, labor controlling and other government regulating agencies. This fear keeps them away from the mainstream Industry. This also leads to the lack of interaction among the small scale, medium scale and higher level industry for a purposeful vendor development.
National Exhibitions held annually can be very helpful in bringing out the skills, the range of products and opportunities of group collaboration. It will help the planners and large scale engineering industry in defining the way for developing skills in order to make this sector strong and viable. This will culminate a Vendors List which can be recommended to foreign suppliers interested in coming to this market and starting assembling / manufacturing on large scale.The interaction between the foreign textile manufacturing industry could also be enhanced by facilitating the indigenous Textile Engineering Industry to participate in the specialized Exhibitions and fairs being held in those countries.
Our main competitors in primary textile products with the advantage of large engineering sector in this region are China and India. The only country in this region without strong engineering base is Pakistan and our dependence upon outside Engineering Industry keeps our cost of production higher with low engineering skills.
COTTON Industry Development Association
During the 1960s and 1970s, light industry expanded rapidly— especially textiles, sugar refining, fertilizers, and other manufactures derived from local raw materials. Large government investments in the 1970s established the country's first large-scale ship-building and steel milling operations; the production of chemical fertilizers was also given special government support. The Pakistan Industrial Development Corp., established in the early 1980s with IDA credit, developed industrial estates for small- and medium-scale industries, assisting their occupants in obtaining credit, raw materials, technical and managerial assistance, access to production facilities, as well as marketing support. Despite steady overall industrial growth during the 1980s, the sector remains concentrated in cotton processing, textiles, food processing and petroleum refining.
The 1973 nationalization program, which placed 10 basic industries wholly within the public sector, was reversed in 1991 with the enactment of an ambitious privatization program. In 1992, the government began auctioning off majority control in nearly all public sector industrial enterprises, including those manufacturing chemicals, fertilizers, engineering products, petroleum products, cement, automobiles, and other industrial products requiring a high level of capital investment, to private investors. In 1995, however, the speed of privatization began to slow as the sale of some large state-owned units were stalled and postponed. In 2002, the public industrial sector, under the Production Wing of the Ministry of Industries and Production consisted of eight public holding companies—Pakistan Steel, the State Cement Corporation (PACO), Federal Chemical and Ceramics Corporation (FCCC), State Petroleum Refining and Petrochemical Corporation (PERAC), State Engineering Corporation (SEC), the Pakistan Industrial Development Corporation (PIDC), the state fertilizer corporation and Pakistan Automobile Corporation. The majority of the 74 production enterprises controlled by these holding companies have been privatized, and most of those remaining are scheduled to be sold. The public sector continues to dominate in steel, heavy engineering, automobiles, petroleum and defense-related production.
Cotton textile production is the most important of Pakistan's industries, accounting for about 19% of large-scale industrial employment, and 60% of total exports in 2000/01. Pakistan has become self-sufficient in cotton fabrics and exports substantial quantities. Some long and extra-long staple cotton is imported to meet demand for finer cottons. About 80% of the textile industry is based on cotton, but factories also produce synthetic fabrics, worsted yarn and jute textiles. Jute textile output amounted to 70,100 tons in 1999/00. The textile industry as a whole employs about 38% of the industrial work force, accounts for 8.5% of GDP, 31% of total investment, and 27% of industrial value-added.
Other important industries include food processing, chemicals manufacture, and the iron and steel industries. Food processing is considered Pakistan's largest industry, accounting for slightly more than 27 of value-added production. Pakistan Steel, the country's only integrated steel mill, employs about 14,500 workers and has an annual production capacity of 1.1 million tons. The government plans to expand the mill's annual capacity to 3 million tons. Pakistan Steel produces coke, pig iron, billets, hot and cold rolled coils and sheets, and galvanized sheets. In June 1999, the first tin-plating plant began operation, a joint venture with Japan.
Pakistan has ten fertilizer plants, six state-owned and four private, with a total annual production capacity of 4.65 million tons. Production in 2000/01 was 3.66 million tons, up 10.5% from 1999/00. There are 21 cement plants, four state-owned and 17 private, with an annual production capacity of 19.2 million tons. Production in 1999/00 was 9.9 million tons. Up 4% from 1999/98. Pakistan's chemical industry produces an number of basic chemicals used in its other industries, including soda ash, caustic soda and sulfuric acid. Industrial output from other major industries also includes refined sugar, vegetable ghee, urea, rubber tubes, electric motors, electrical consumer products (light bulbs, air conditioners, fans refrigerators, freezers, TV sets, radios, and sewing machines), and pharmaceuticals
SMALL SCALE INDUSTRIES OF PAKISTAN
- Food products and Beverages
- Tobacco Products
- Manufacture of Textile
- Wearing, apparel, dressing/dying of fur
- Tanning/dressing of leather & footwear
- Wood and products of wood and cork
- Paper and paper products
- Publishing, printing & reproduction
- Coke, petroleum products & nuclear fuel
- Chemical and chemical products
- Rubber and plastic products
- Non-metallic mineral products
- Basic metals
- Fabricated metal products
- Machinery and equipment n.e.c.
- Office, accounting, computing machinery
- Electrical machinery and apparatus n.e.c.
- Radio, TV communication Parts (Antennas etc)
- Medical, precision & optical instruments
- Motor vehicles, trailers and semi-trailers(Buses Body etc)
- Other transport equipment
- Furniture, sports and athletic goods, other manufact. n.e.c
LARGE SCALE INDUSTRIES OF PAKISTAN
Significance and Important sources of External Finance
Total Foreign Investment reached at all time high in the country’s history and amounted to $ 8.42 billion or 5.9% of GDP during 2006-07as against $ 4.48 billion in 2005-06 and $ 1.67 billion in 2004-05. Foreign Direct Investment – an important component of foreign investment - amounted to $ 5.1 billion in 2006-07 which is 45 times higher than 2005-06 and 236 times more than 2004-05. During this period FDI has primarily come in four major areas: telecom, energy (oil and gas, power, petroleum refineries), banking and finance, and food and beverages. These four groups accounted for over 80 percent of FDI inflows. Other areas such as textile, chemicals and petro-chemicals, automobiles, construction and trade are also attracting FDI. Almost 78 percent of FDI has come from five countries, namely the UAE, US, UK, China and Netherlands. Foreign investment of this magnitude reflects the confidence of global investors on the current and future prospects of Pakistan economy.
Pakistan’s total liquid foreign exchange reserves stood at $15.7 billion at the end of July 2007, considerably higher than the end-June 2006 level of US$ 13.1 billion. These strategic reserves have also grown considerably from being $12.6 billion in 2004-05 to $15.7 billion in July 2007 – an increase of $3.1 billion in just three years. Many factors contributed towards this comfortable position of reserves. The most prominent among those are: private transfers that include remittances, floatation of bonds, higher FDI flows and privatization proceeds to name a few.
Rapid and broad-based economic growth over a prolonged period is essential for poverty reduction and improving distribution. Many developing countries have succeeded in boosting growth for a short period but only those that achieved higher economic growth over a long period have seen a lasting reduction in poverty. Strong economic growth, large inflow of remittances and Rs.2217 billion spending on social sector and poverty-related program during 2001/02 till 2006/07 have succeeded in reducing poverty in Pakistan. At the national level, headcount decreased from 34.46 percent in 2000-01 to 23.9 percent in 2004-05, depicting a substantial reduction of 10.5 percentage points over this period. In absolute numbers the count of poor persons has fallen from 49.23 million in 2001 to 36.45 million in 2004-05. While rural poverty declined even more sharply (11.13 percentage points) urban poverty also declined by 7.75 percentage points. It is generally argued that though poverty has declined in Pakistan, the gap between rich and poor has widened. The result suggests that though consumption inequality in Pakistan has increased marginally during 2001-05, Pakistan is by far one of the least unequal countries of the world2.
The results from PSLM 2004-05 on social indicators when compared with PIHS 2000-01 reveal interesting facts with respects access to various services of bottom 20 percent of population to top 20 percent of the population. The results show that not only access to services improved faster for the poor, the disparities in access between the poor and the rich has narrowed. This fact, besides the PSLM 2004-05 survey, also becomes evident from the employment generation figures available for the last few years. About 11.8 million new jobs have been created between 1999-07. Out of these 11.8 million new jobs, 6.1 million have been created just during the last three years. This figure of enhancement of employment opportunities speaks volumes regarding the general direction of various government policies. Areas favored by these job openings were the IT sector, services sector, call centers, financial institutions, telecom sector etc. in addition, the results from PSLM 2005-06 have also been released recently. The new results suggest that most of the indicators pertaining to education such as gross and net enrollment at primary level and literacy rate have improved significantly over the last 5 years (2001-2006). As regards, health indicators, children immunization, incident of diarrhea and infant mortality have improved appreciably. Infant mortality is 2 Economist Magazine (Asia), 11th August 2007 down from 82 to 70 during 2001-06. Contraceptive prevalence rate has improved and consequently the total fertility rate has registered decline from 4.5 to 3.8 in 7 years. While the economy of Pakistan has gained further traction during 2004-07, there are however, some weaker areas that need to be highlighted. First and foremost is the sharp pick up in the prices of some of the essential food items. Over the last decade, with a few exceptions, inflation around the world has been at retreat. More recently, with a pick-up in growth, inflation has started to rise again. Pakistan’s economy exhibited a similar trend with a low inflation environment for last three years with a sharp pick-up in 2004- 05 and a gradual abatement of price pressure thereafter. The rate of inflation averaged 8.3 percent during the last three years. The average inflation for the year 2006-07 has been 7.8 percent. Based on the above facts it is clear that the inflation over the period under consideration has largely been driven by higher food inflation. This food inflation has been fueled by a combination of global trends in the prices of several commodities and local supply – and demand – driven factors. Globally, higher prices of edible oil (palm oil and soybean) and dependency on their imports transmitted higher international prices to domestic prices. It may be pointed out that higher food inflation is now a global phenomenon as many countries around the world (for example India and China) are also experiencing higher food inflation. Furthermore, shortfall in domestic production of pulses, rice, chilies, other vegetable items (onion, tomato, etc) and fruits also contributed to the rise in domestic food prices. There are a few key food items which are widely consumed and whose prices remained high during the year and therefore contributed to the pick-up in food inflation. These items include: rice, masur and gram pulses, milk powder, vegetable ghee and cooking oil, red chilies, onions and tomato. On the other hand, the prices of some essential food items were lower this year compared with last year. These items include: moong pulse, sugar, chicken, potato etc. Non-food inflation in general and core inflation in particular have declined as a result of tightening of monetary policy during the year.
The challenge for the government is therefore to maintain a balance between the supply and demand for essential food items by enhancing domestic production and augmenting their supplies in the shortest possible time through imports in the event of shortfall in the production of these items. The key to addressing this challenge is to give due importance to minor corps, and livestock and dairy sectors which have been neglected by successive governments. The relative roles of these two sub-sectors, which together account for 62 percent of agricultural value added, in keeping food prices stable need to be emphasized and given due attention. While Pakistan has made remarkable progress in its economic performance, undertaken wide-ranging structural reforms, achieved both macroeconomic stability and strong growth, sharply reduced poverty, yet there is no room for complacency. Although the present economic scenario holds immense expectations for the future but Pakistan’s economic managers cannot rest on their laurels. A lot still remains to be done both on the external and the domestic front. For the forthcoming years numerous economic reforms, with the blessing of the international community, are on the cards and it can be safely said that the future will bring about more economic prosperity for the people of Pakistan.
Significance and Important sources of Internal Finance
Internal Finance Wing of the Finance Division deals with financial / banking sector including, SBP, NBP, and DFIs like HBFC, ZTBL, FWBL, SME Bank and currency management through Pakistan Mint and Pakistan Security Printing Corporation. The Financial Sector Reform Programme (FSRP) which was initiated in 1990s continued during the year 2005-06. Under the FSRP, 90% of the country’s banking sector has been privatized
Corporate and Industrial Restructuring Corporation (CIRC)
The Corporate and Industrial Restructuring Corporation (CIRC) was established on 22nd September 2000 vide Ordinance No.L of 2000. The purpose was, Acquisition, Restructuring, Rehabilitation, Management, Disposition and Realization of non-performing loans of various state owned-banks and financial institutions, to deal more effectively with the overall reforms and privatization of financial institutions through cleaning of their balance sheets. Non-Performing Assets (NPAs) from
NBP, UBL, ZTBL, NDFC and IDBP were acquired. The life of the corporation is 6 years from the date of commencement. As such September 22nd 2006 is the sunset date of CIRC. The purpose of the corporation has successfully been achieved by restructuring the banks and Financial institutions. Four banks namely HBL, UBL, MCB and ABL have been privatized and 23.2% shares of NBP were off-loaded through stock market.
SME Bank Limited
The importance of the SME sector in achieving higher levels of sustainable growth in the economy through potential contribution in creation of employment opportunities, income generation and GDP is now well recognized. A sizeable number of SMEs are currently operating in Pakistan, most of which are in the informal sector. The lack of resources is recognized as a major impediment in the development of the SME sector. Realizing the importance of SMEs and their financial constraints, SME Bank Ltd. Was established consequent to the amalgamation of defunct SBFC & RDFC in 2002 with the objective to extend financial & technical assistance for the support & development of SMEs. The importance that the government is giving to the SME sector is also supported by the Asian Development Bank and the World Bank. SME bank and its subsidiary, SME Leasing Ltd. (SMEL), during the financial year 2005-06 have provided financial assistance amounting to Rs.1,600 million to 1,324 small and medium enterprises. SME Bank also introduced new variety of financial products with enhanced financial limits to cater to the needs of flourishing SMEs. The efforts of SME Bank are in addition to the other commercial banks offering finances to SMEs. The SME Sector Development Programme of the government is aiming at economic empowerment and providing opportunities towards gainful employment, increasing exports and reducing dependency on imports.
Zarai Taraqiati Bank Limited (ZTBL)
Zarai Taraqiati Bank Limited (ZTBL) functions as a prime financial institution supporting and supplementing government’s efforts towards strengthening agriculture sector. The main thrust of the Bank’s operational activities is towards modernization of agriculture to increase farm productivity and generate rural self- employment thereby contributing to alleviating poverty while focusing on small farmers and rural women. The following table summarises the bank’s performance during the period July 2005 to June 2006.
House Building Finance Corporation
House Building Finance Corporation (HBFC) was established in the year 1952 as a Statutory Federal Body under HBFC Act 1952 with the object of providing financial assistance for construction and purchase of houses to the people of Pakistan. It is amongst the oldest housing finance institutions in Asia Pacific region. For nearly 50 years it enjoyed the monopoly in housing finance. HBFC has always maintained its business focus for low & middle income housing needs. Now it is in the process of Corporatization which is likely to be completed shortly. HBFC is providing housing finance all over the country through 58 District Offices, 12 Zonal Offices and 25 Representative Offices/Service Agents spread all over the country including Azad Kashmir and Northern Areas. The staff strength of HBFC consists of 862 officers and 544 supporting staff members.
Nationalization and its after effects on Industrialization Development of Pakistan
Financial landscape of the country was significantly altered in early 1970s with nationalization of domestic banks and expansion of public sector development finance institutions. By the end of 1980s, it became quite clear that the national socio-economic objectives sought to be achieved by nationalization, were not being met. Instead, the pre-dominance of public sector in banking and nonbank financial institutions, coupled with the instruments of direct monetary control, were becoming increasingly responsible for financial inefficiency, crowding out of the private sector, deteriorating quality of assets and rising vulnerability of financial institutions.
Dominance of public sector financial institutions, at the end of FY90, was apparent with a share of 93.8 percent in total assets. Similarly high shares existed for deposits, advances and investments.
Within the banking sector, share of public sector was 92.2 percent in total assets, while the rest belonged to foreign banks as domestic private banks did not exist at that time. Structure of non-bank financial institutions was more skewed with a hefty share of development finance institutions (all in public sector) at 78.6 percent. Share of investment banks, leasing and modaraba companies remained small, despite their inception from early to mid 1980s. With these characteristics, financial structure at the end of FY90 did not provide a level playing field for competition and growth.
Besides the uneven ownership of financial system towards the public sector, a serious distortion was being caused by the presence of National Savings Schemes. Relatively higher returns on these schemes were causing dis-intermediation and worsening the crowding out of the private sector, already squeezed under the system of financial repression exercised largely through direct monetary controls on the banking system. National economy was taking a double hit because of these schemes.
First, domestic debt was mounting rapidly, with rising servicing costs and second, the investment potential of the economy was being constrained due to misallocation of credit. Not only was the financial system becoming more stressful, supervisory system was also losing its effectiveness. SBP’s role, as a central bank, had considerably been weakened due to the presence of Pakistan Banking Council (PBC), which acted as a holding company of nationalized commercial banks and also exercised supervisory control over them. Duplication of supervisory role was diluting SBP’s enforcement of its regulations over nationalized commercial banks. Not only the supervisory capabilities of SBP were becoming ineffective, it was also not allowed to formulate and implement the monetary policy independently. In addition to this, non-bank financial institutions were practically unsupervised because of lack of autonomy and multiplicity of supervisory agencies over them that included Corporate Law Authority, Monopoly Control Authority and Controller of Capital Issues, all attached directly with the Ministry of Finance. Structure of financial markets was determined by the type and size of its participants. With the government as the main player in the arena, supported by the passive supervisors and a few large sized nationalized banks and DFIs, private sector participants were only watching the mobilization of financial savings from the households and consequent diversion to the government and priority sectors. There were hardly any markets in the true sense of the word, i.e., markets where players’ interaction resulted in pricing and clearing. Financial markets, after nationalization of commercial banks, were not equating the supply of funds according to their demand; rather a set of distortions was being imposed through the system of financial repression characterized by credit rationing and other controls.
The foreign exchange market was highly regulated by SBP through a system of exchange control over suppliers and users of foreign exchange. Only two of the several financial markets that had the competitiveness of call money market was largely irrelevant for the financial and real sectors as a whole, because of their inability to transmit interest rate signals due to the absence of a proper monetary transmission mechanism. Activities in the equity market were mainly confined to Karachi Stock Exchange with limited turnover of shares and market capitalization. Corporate debt market was almost non-existent except for a few bonds of public sector enterprises. Market of mutual funds was, consequently, also very limited.
In short, the financial structure at the end of 1980s was hardly conducive for meeting the growing financial needs of the economy. Although the nationalization of banks in early 1970s resulted in a rapid expansion of branch network within the country, the system of credit ceilings, interest rate controls, subsidized loans, directed credits and high government borrowing both from banks and nonbanks (through national savings schemes) were adversely affecting the banking system.
Weaknesses in the supervisory system and lack of governance in state-owned institutions were worsening the quality of services being delivered. Inefficiencies due to over-staffing and over branching were continuously adding to the administrative cost of public sector institutions. Spread between lending and deposit rates was concealing the intermediation inefficiencies due to the system of caps and ceilings on interest rates. Data disclosure standards were not resulting in conveying full picture of financial health of institutions. In short, the financial health was deteriorating fast, but largely concealed in opaque balance sheets of banks and NBFIs.
Financial Sector Reforms During 1990s
Realizing the inherent weaknesses of the financial structure that emerged after nationalization,
government initiated a broad based program of reforms in the financial sector. Objectives of reforms were to create a level playing field for financial institutions and markets for instilling competition, strengthening their governance and supervision, and adopting a market-based indirect system of monetary, exchange and credit management for better allocation of financial resources. Reforms covered seven important areas: financial liberalization, institutional strengthening, domestic debt, monetary management, banking law, foreign exchange and capital market. Banking sector was liberalized by permitting private banks to operate and compete with nationalized commercial banks. Competition was promoted by privatization of MCB and ABL. Initially at the start of 1990s, ten new banks were permitted to operate, of which eight started functioning. A couple of new banks joined later in the private sector. Governance of financial institutions was strengthened by insertion of new sections in Banking Companies Ordinance, 1962. Loan recovery process was streamlined by issuing clear guidelines for loan classification and requiring banks to submit regular reports on recoveries. A number of state-owned banks and DFIs were downsized and restructured through golden handshake and branch closure programs in later half of 1990s. Prudential measures were strengthened at the same time to ensure capital adequacy and disclosure of financial data reflecting true conditions of banks.
Several steps were taken to enhance effectiveness of SBP: a Credit Information Bureau (CIB) was established to keep credit records; an NBFIs Regulation and Supervision Department was established that subsequently issued ‘Rules of Business’ to supervise them; autonomy was granted to SBP in matters related to administration and conduct of business, that was later expanded to include formulation and implementation of monetary policy; regulatory function of SBP was consolidated through dissolution of Pakistan Banking Council; and supervisory role was further enhanced by placement of CAMELS and CAELS frameworks and extensive training of SBP officers on off-site surveillance and on-site inspection.
Domestic debt management underwent one of the most significant reform processes during 1990s. A primary market of treasury bills was established through auctions that replaced earlier tap system Secondary market activities were promoted by replacing the discount window with SBP 3-Day repo facility. A system of approved dealers was established to widen the participation in auctions. A longterm auctionable government paper was also introduced in 3, 5 and 10-year maturities. Establishment of a book-based system of government securities settlement greatly enhanced the volumes of repo transactions in the secondary market. An important step was also taken with regard to national savings schemes; Khas Deposit Certificates, with very high returns, were discontinued. Various monetary management measures were initiated to dismantle the system of financial repression and establish a market-based mechanism of monetary control. Bank-by-bank credit ceilings were abolished and replaced with credit deposit ratio that too, was subsequently removed. In addition to this, caps on lending rates of banks and NBFIs were eliminated to pave the way for implementation of monetary policy indirectly through signals of liquidity and short-term interest rate changes.
Banking laws also underwent significant changes during 1990s in order to provide a supportive legislative framework for the reform process. Important amendments were made in all the relevant banking laws including SBP Act, 1956; Banking Companies Ordinance, 1962; Banks
(Nationalization) Act, 1974; and Banking Companies (Recovery of Loans, Advances, Credits and Finances) Act, 1997. The most important of these were the amendment in SBP Act, 1956 that provided for its full operational autonomy in conjunction with the dissolution of PBC in 1997.
Another important set of reforms, related to exchange and payments, was initiated in early 1990s, and quickly resulted in promotion of bank intermediation, encouragement of foreign investment, facilitation of forex transactions and enhancement of international trade. These steps in conjunction with capital market reforms helped in attracting foreign portfolio investment. Capital market saw an establishment of a central depository for automated trading of corporate equities and bonds. Further measures included establishment of credit rating agencies and transformation of Corporate Law Authority into an independent Securities and Exchange Commission of Pakistan, with full supervisory powers over capital market and non-bank financial companies.
MAIN CAUSE OF INDUSTRIAL BACKWARDNESS
Despite their great diversity they had one thing in common: they suffered from varying degrees of deprivation and different kinds of backwardness despite their immense potential. Some had very poor population; others had wealth imbalances between people and regions; still others whose human resource development was lacking despite great wealth. And I saw how so many pulled themselves out of the mire of backwardness and reached the doorstep of the 21st century. As I saw, so did I learn, because, not least, I also had the opportunity of participating in the development of some of those countries as a senior banker. It was a unique experience indeed. I saw an economic miracle unfold before my eyes as country after country transformed itself from relative backwardness to positions of great affluence and development, literally in a single life span. Why can’t we develop like that too? I often asked myself. Why can’t we, with our far greater human and natural resources, become a force to be reckoned with economically and not just geo-strategically? We have the potential - much more than most others. What we lacked was a clear vision in which everyone has a stake and which we all own collectively. It is this vision that leads to modern and contemporary policies with continuity and consistency. As I looked out of the window of my Manhattan office and saw the purposeful stride of ordinary citizens going about their lives, this thought would vex me. It would haunt me in my pensive moments, for if one knows that it cannot be done one comes to a sad acceptance. But when one knows that it can be done, and done with much less ado than others who have succeeded and where we have not even begun to try, it makes one restless and discontented.
But it never made me despondent for I always knew that it could be done provided we had the opportunity that comes from unity of purpose, clarity of vision and a dynamic leadership hand-in-hand with a people galvanised by self-belief and self-esteem marching towards greatness in unison and harmony. This is how history is made. Making history is in our genes. We made an unmatched history when, led by the Quaid-e-Azam Mohammed Ali Jinnah the Muslims of India struggled for and won Pakistan against unimaginable odds. They succeeded because they were fired by unity of purpose, faith in Allah and in themselves and enormous discipline. They won not only freedom, they made a new country. In so doing they altered the course of history by changing the map of the world. Thus it has always been my conviction that with Allah’s blessings and the implementation of sagacious policies, Pakistan too can perform such a miracle and many more during our lifetimes. We, too, can witness the emergence of Pakistan as a highly developed, prosperous and modern Islamic state. A Pakistan where poverty has been banished, where our children attend outstanding schools as a matter of routine, where the genius of our people is fully harnessed because it finds the proper opportunities and channels for our advancement, where widespread disease has been wiped out, where we have modern, thriving businesses and markets. A Pakistan which is populated with modern urban centres and dynamic rural communities where all Pakistanis can lead peaceful, productive and fulfilling lives free of harassment and hassle. A Pakistan that becomes a model for others to emulate.
‘OUR MOMENT HAS COME’
Since returning home five years ago, I have witnessed first-hand the great ability of our people to face hardship with great dignity and patience, what tremendous resilience they have, what a hardworking and God-fearing people we all are. Given the right environment we have the character to achieve any goal, climb any mountain. Our moment has come. This is not just my feeling. It is my conviction. All that remains is for us to seize our moment and make it truly ours. It is for us to reach that which is beyond our grasp and show to the world why the heavens were made. I am determined that we will not lose this moment. We will not let it slip away. We will not let it pass. With the help of the Almighty and His people, we will grasp it. I know it. I feel it in my bones. I have seen how green the grass is on the other side. I am determined that our people will see it too.
Why am I so convinced that we will reach our goal of a prosperity that is shared equitably by all? Because after a long time and much sacrifice we have reached the stage where we can achieve fairly high rates of economic growth and look forward to doubling our national output every decade. A per capita GDP target of $1,500 by the year 2015 is well within our sights. This will translate into higher incomes and a much better quality of life for the vast majority of our people. This is our major long-term goal and will require our GDP to grow by around 7 to 8 per cent every year on a sustainable and consistent basis.
I am mindful of the fact that achieving this kind of growth will be challenging, but it is eminently attainable. To do this we will need to excel in and achieve mastery over the entire value chain in our traditional fortes, like the textile industry, for instance, and agriculture - especially agriculture. At the same time we will need to graduate into higher value-added and fast-growing sectors like construction, energy, engineering, electronics, information technology and bio-technology. We will have to unleash the potential of our urban areas for growth and creativity. We will have to make a quantum leap in value addition in agriculture and involve every village and hamlet in the development process. 100 % LITERACY IN 10 YEARS It is the God-given right of the people to expect the State to endow them with the ability to acquire the best knowledge, have access to healthcare and to justice. All this requires major and continuous investment in human beings. Our people have to be equipped with the technical and managerial skills to enable them to participate fully in the world economy. I believe that our people are our biggest resource and investment in their development will pay off many times over. My aim is to achieve 100 per cent literacy within the next 10 years and create quality facilities in the country to produce the world class human resources that are needed by the economy. We have to urgently improve our standard of education at all levels. Presently, we have a very general education system that does not have linkages to the evolving job market. Because of this, not only do our people, particularly our youth, suffer, Pakistan suffers as well from woeful gaps in skills. Thus we will lay great emphasis on vocational training so that we turn out the best skilled workers that there are. The ability is there, as witness the phenomenal engineering and sports products coming out of Gujranwala, Gujrat and Sialkot, to name but three cities.
In order to have a population with a modern and contemporary education, we must learn English. This in no way militates against our national language or any of our mother tongues. Language is but a tool of learning, which equips people to acquire the most up-to-date knowledge as fast as possible. It does not replace or alter one’s identity. Do you think that people like me got so far in the world simply because we are very intelligent? Our intelligence would have got us nowhere if we did not have good English, just as far more intelligent and educated people never got the opportunity to compete and excel internationally because they did not. Yet by the Grace of God we have remained rooted in Islam and anchored in our culture. The English language should be just one of the many modern tools that our people must acquire. We must equip our children with this vital tool by teaching it to them as a subject, just as we teach - and will always continue to teach - religious studies and Urdu. It should be treated like studying accounting or physics. Let us face it: English has become the international lingua franca in which the bulk of the latest knowledge, information and data are imparted. Even in developed countries that have other languages people are learning English without feeling threatened. We already have yet another advantage: English is one of our two official languages. So let us develop this tool and give our people a chance to compete at the international level. For when our people compete successfully, it goes without saying that so does Pakistan.
A healthy nation is a productive nation. This has become a truism precisely because it is true. Thus it is my goal to launch programmes that lead to primary healthcare for all within the next 10 years. In the same timeframe, and as part of our overall health strategy, we will initiate programmes that provide safe drinking water for everyone in rural and urban areas alike. To improve the quality of life of the people, I am determined to improve the quality of public service delivery to the people at their doorsteps. In this respect, amongst other services like education, health, water and sanitation, a fair and affordable justice system at the grassroots level that provides justice to the poorest and least empowered in a reasonable period of time will be provided. This is an imperative. Police has to be reformed to provide impartial, transparent and corruption-free service to all segments of society and ensure security of life, limb and property for all citizens. A confidant, well educated and healthy population is the key to our success.
Our human development strategies, our initiatives in the industrial, agricultural, services and natural resource sectors will be designed to make Pakistan a regional economic powerhouse that is recognised as an economic lynchpin of the region. Our goal is to become the trade and manufacturing hub that connects North Asia, Central Asia, West Asia, the Middle East and South Asia. We intend to exploit our unique geo-strategic position fully for the welfare of our people and use this major economic and competitive advantage as a key driver of our economic growth.
People ask me: can we really pull it off? My answer is, ‘yes’, provided we all pull in the same direction. The endeavour has to be a joint public-private partnership embedded in an overall system that works and has in-built incentives to guide us in the right direction. Good governance in the public sector has to be coupled with good governance in the private sector as well. We intend to deregulate the economy substantially while ensuring that public sector institutions that provide critical services deliver those services that the people expect of them. This is the best way to create an enabling environment for private enterprise and initiative to develop and thrive. At the same time we will support the efforts of the private sector to grow and improve itself. I am fully confident that the private sector will deliver in a big way by providing millions of sustainable jobs to the people and outstanding products and services to the markets they serve.
Now let me get down to brass tacks. Years of neglect have deprived our agriculture of new ideas, processes and products. We will reverse this. We will bring the results of world class research to our farmer so that we can leapfrog productivity gaps prevalent in Pakistan. Newer seeds, newer pesticides, newer processes will be introduced and made available in time and easily. Large water storage dams will be constructed and water shortage eliminated. In our development thinking we will connect production with modern wholesale markets and the markets in turn will be connected to processing and value adding agri-business centres. The competitive advantage of each region and district will be explored and exploited. The idea is that the people of every village can excel in at least one value-added product that can profitably be brought to the urban and international markets. We have great potential in livestock production and downstream processing, horticulture, fruits and vegetables and other products to which value can be added. Our objective is to create an agriculture sector that magnifies ‘on-farm employment’ with massive ‘off-farm employment’ opportunities. This will bring prosperity to the villages, bridge the urban-rural divide and reduce the need for rural-urban migration. In manufacturing we will provide a hassle-free environment to our industrialists. We plan to develop modern production and export enclaves. Industrial estates will be developed that will have all the requisite infrastructure and modern facilities. We will support manufacturing clusters by programmes that upgrade their technological capabilities, improve their connections with the international markets and provide state-of-the-art training to their workforce. We will rationalise and reduce the number of taxes, create a tax system that promotes employment-creating manufacturing, improve labour laws and deregulate arcane regulations.
In the services sector, we have enormous opportunities in housing and construction, the tourism and hotel industry, communications and transport development, the retailing industry and commercial developments. This sector has the potential of creating millions of jobs - our objective is to remove the regulatory and other hurdles in its development. Scarcity of land for housing and development will be eliminated. New housing schemes based on proper planning and modern amenities will be launched to meet rising demand. Model village programmes will be developed for upgrading rural housing.
As the economy grows there will be tremendous opportunities in the energy sector. We plan to boost domestic exploration and development of oil and gas resources and bring in oil and gas pipelines from Central and West Asia. The power sector will witness a major expansion. We will fully exploit our hydel, gas and coal potential to generate affordable power. We intend to be the most energy-efficient and energy-sufficient manufacturing economy in the region.
We are already witnessing a boom in telecommunications. New technology is being introduced at a frenzied pace. This trend will be further intensified. On our path to becoming the regional economic powerhouse and trade and manufacturing hub, we will have to develop a network of modern communication systems including electronic, road, rail and air networks, banking systems that connect the regional economies in tandem with a financial services industry that can channel billions of dollars into the needed infrastructure projects. All this activity is coming our way. I am aware of the enormous challenges we face but I also have the realisation that this time we must succeed. We have to create ‘Pakistan Inc’ to reap all the benefits. The thrill of achieving enormous gain and change for our country and its people is what is driving me. God willing we will succeed.
But success will elude us if we don’t maintain a high level of political stability, with both the government and the opposition ensuring the viability of the system and working towards making Pakistan truly democratic, which means, first and foremost, continuously and consistently improving the human condition. We have to avoid political point scoring and develop a working and stable consensus between the opposition and the government. All countries that have developed had sound and stable political processes. Where the political process was uncertain, they failed to develop. We need collective vision, continuity and consistency of policies, good governance and a high degree of transparency and accountability. Having a healthy debate is a must in a working democracy, but we must also ensure that only such decisions are taken that sacrifice personal interests at the alter of the interests of the country. We will develop harmony and brotherhood among the provinces and make certain that the benefits of development reach every nook and corner of the country. We have to reject corruption and nepotism in all its manifestations and ensure that public funds are utilised most effectively.
Our external relations should so develop that the international environment becomes conducive to our development efforts. Regional peace and cooperation have to be promoted and access to global and regional markets enhanced. We have to ensure an investment-friendly climate that promotes both domestic and foreign investment in our economy. This would require us as a nation to protect our internal security environment from deterioration and join the government in challenging and eliminating all forms of violence in our society. We have to create an image that is not threatening to Pakistanis and foreigners alike, be they visitors or investors. Terrorism of all types and dimensions will be rooted out, but while doing so we must remain cognisant of the causes that lead to this horrific effect so that this monster does not raise its ugly head again in our sacred land. Its genuine causes must be identified, addressed and redressed. People may be rich but will have little rights if their country is beset with terrorism because in the State’s fight to eliminate terrorism some rights of the people inevitably get eroded. No nation can develop without peace and security.
Our defence capability, strengthened by our nuclear deterrent, guarantees our sovereignty. We seek peace for everybody because without peace there can be no development and without development there can be no prosperity. So while we have no offensive design against anyone we will guard our sovereignty with full vigour. Our armed forces have played a brilliant role in protecting our internal and border security. A MODERN, VIBRANT ISLAMIC STATE’ Pakistan is a moderate country. President Pervez Musharraf’s initiative of ‘Enlightened Moderation’ is the way to proceed for the Muslim world at large and the rest of the world too. The Organisation of Islamic Conference and the Muslim Ummah need to do a lot more and Pakistan has its role to play here. If Pakistan projects an image of a modern, vibrant Islamic state, it will help improve the image of Muslim Ummah too. Our foreign policy is driven by national interests. The way to expand relationships with other countries is to create mutual dependencies. Our priority will be to have closer relations with the Muslim world while pursuing a path of peace and diplomacy that ensures the recognition of the rights and aspirations of the people of Jammu and Kashmir. China is our strategic ally, as always. Ours is a very special, very unique relationship that has stood the test of time and travail. With the big powers our relationship has to be based on fair values and mutual interests. Relations with all of them have improved consistently. We must now include more economic diplomacy in our overall foreign policy as that creates a strong bond between any two countries - this will include more trade, more investment and I even include the export of manpower, because this too creates tremendous linkages.
Our vision is to be a vibrant, modern Islamic state where the people have a myriad of opportunities. Never imagine that the heavens will open and riches will start falling out of the sky. God does not help a people that do not help themselves. That means hard work, honesty and steadfastness of purpose and our prime purpose has to be to develop our country. So let us make a covenant with ourselves to work together to realise Pakistan’s true and great potential. In this lies our salvation.