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tan IndustryPresentation Transcript

1. KEY ISSUES IN INDUSTRY IN PAKISTANGroup Members:RabiaFarooqui Umm E Rabab Rizvi Aunuddin QadriRehman Siddique

Usama Batavia Sehrish IrfanRoshanna Durrani Usman Farooq

Saroosh ZahidSaad Imtiaz Versha QaziShahrukh SamadSaad Zahid

Yawar Masood Syed Danial MusSadiq Samin Zulfiqar sajwani

Tayyaba Sami Omar Mahmood

2. Numbers and Trends in IndustryGrowth in industrial sector rosedramatically in 1950s and 1960s oReason: Initial Investment The

growth rates of small scale sector rose. Small scale sector was more

productive in Pakistan. The shift of textiles from large to small scale.

The growth of informal sector underestimated. Growth in mining &

construction industry remained volatile until 1970s-economy began to

expand.

3. Numbers and Trends in Industry 1970s nationalization-increase ingrowth rates. Domination of public sector. 1990s privatization-role of

private sector increased.Share of textile was the highest in the

Manufacturing Sector. Population rose but employment in

formalmanufacturing industry reduced-employment rose in informal

sectors. Large scale industries became capital intensive.

4. The Small-Scale Manufacturing Sector Characteristics Growth rateswere higher than formal sector.Employment in informal sector rose

dramatically The share of informal sector slightly increased.Textiles,

fabricated metals and food and tobacco were the largest sectors. Formal

sector was highly capital intensive.

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remittances rose and home demand increased. Middle class prospered.shift from LSM to SSI. 1970s and 1980s industrial capital diverted to

exports paving way for SSI products.Cottage industries act of 1972SSI

products were export oriented. Import liberalizationsmall scale industry

began to grow. Demand for agricultural machinery rose. The

devaluation of 1972 favored SSI5. Emergence and Growth The green

revolution in 1960s

6. Issues Affecting Small Scale Sector Unwaged family workers in smallsector. Labor displacement informal sector. Formal sector had high

labor productivity Informal sector had higher capital efficiency.

Government policy only favored LSM. This gave hands off policy to

SSI.Linkages of LSM with SSI gave another boost to SSI. Unavailability

of credit to SSI was the major issue.

7. Issues Affecting Small Scale Sector Other ways to obtain credit wereused.SSI generated 25% of Pakistans export earnings. The

government needed to provide SSI appropriate credit packages.

8. Textile Industry and its crisis. Textile sector holds a significant positionin Pakistan > employment > value added Pakistans textile industry was

quite prominent and emerging in world cotton textile market in 1960s and

70s.

9. Comparison of Pakistans TextileMarket with Hong Kong and Korea1972 Korea and Hong Kong had less share in the world textile market

than Pakistan 1988 Pakistans poor performance. -- Pakistan had

lesser share than Korea and Hong Kong

10. Reasons for decline Pakistans textile industry concentratedamongst few industrial houses Performance of looms and spindles

Shift from large scale to small scale manufacturing and its impact

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Interest of state towards public sector intermediate and capital goods

industry Impact of Cottage industry Act (fragmentation of firm size)

11. Pakistan failed to diversify Relied only on growth in world marketPakistani entrepreneurs ignored up gradation Pakistan was unable to

meet quotas of advanced capitalist countries UNIDO pointed out factors

that led to decline

12. Some facts Pakistan is worlds fourth largest cotton producer.Pakistan is one of worlds largest cotton exporter but its exports have low

value added Low level of technologyPakistan occupies dominant

position in low cost low quality cotton fabrics market

13. Recommendations Pakistan must enter high quality textile marketImprove quality standards Move into production of synthetic fibres

Invest in R&D of different types of cotton, especially long staple superior

variety

14. Has Public Sector Industry Been a Failure? Diminished role of thestate Public sector Inefficient Costly Poor performance Drain on

exchequer

15. Nationalization program of ZA Bhutto in 1972 Role of PIDC andsuccess in jute, fertilizer, cement industries Zias regime followed by

Privatization Socio-political goals of the Government Studies of Asad

Sayed criticized by the World Bank

Capacity levelAllocative EfficiencyEfficiency levelRates ofprotection16. Studies of Nawab Haider Naqvi and AR Kemal include -

109 units to be privatized at earliest opportunity New Privatizationcommission formed in 199117. The Privatization Process Structural

Adjustment Program begun in 1988 65% of targeted industries

privatized Disinvestment and Deregulation Committee

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Companies were already bankrupt Energy, Telecom and Commercialbanks converted most.18. Initially unsuccessful- Government had to

revise its policy More transparent and effective procedures Transfer of

49 units to private sector by 1992 Reason of fa ilure

Failure to float equity in market Lack of planning Favoritism andcorruption Inconsistency Lack of transparency19. Lack of sufficient

information for investors Process criticized for: Naqwi and Kemals

findings

Multiple exchange ratesIgnorance to agricultural sector Too muchemphasis on manufacturing sector State intrusion 20. Debate over

Efficiency in Industrial Structure By the end of 1960s, it was realized that

elevating growth required substantial costs. Industrial structure was

highly inefficient. Reasons:

21. Taxes discouragement to technical change Unintelligent use ofcapacities.Wastage of resources However, growth still occurred. Most

of the sectors still showed growth prospects. Industrial sector did show

vigor to develop and advance. Many critics believe that the inefficiencies

have been overstated

22. They believe that allocated inefficiencies were remunerated by gainsthat followed. Many believe that this efficiency led to Industrial Crisis in

1970s Overall, small scale industries were the nutrients to Pakistani

economy in the era.

23. Public sectors efficiency cannot be denied, but was much morewidespread. Privatization was a political stunt, as per opinion. Flaws

were mostly structural. Consensus: Inefficiency was due to

overprotection and distorted incentives.