Monday, 23 April 2012
DISCUSS THE MAJOR CAUSES OF INDUSTRIAL
BACKWARDNESS IN PAKISTAN? WHAT ARE THE MEASURES TO REMOVE INDUSTRIAL
BACKWARDNESS?
Introduction:
Backward industrial sector is the
second major sector of the economy of Pakistan. Industrial sector plays
an important role in the development process of any country. Manufacturing is
secondary economic activity after agriculture.
Origin & History:
Since the latter part of the 18th
century manufacturing as a human occupation got much importance. The modern
concept of industry-manufacturing goods began in Great Britain in the late 18th
century.
Causes of industrial backwardness may be divided
into following four major categories:
A. HISTORICAL CAUSES
1) The Policy of British Rulers
There were no favours for the
Muslims due to British government, before independence in the sub-continent.
British exported the raw material at cheaper rate to Britain so that the
industrialization process in the sub-continent is to be stopped.
2)
Lack of Technical Knowledge
Modern technology was introduced in
the beginning of 20th century. British used the modern methods of
production in Britain. But in sub-continent they used old method of production
in all the manufacturing units. So, quality and quantity of production was very
low it creates a bad view of our industry at world level.
3)
Industrial Share
Before partition, there were 921 total
industrial units in sub-continent. But out of 921 industrial units, Pakistan
got only 34 industrial units that are just 3.69 % of total industrial share.
Accordingly, we started our economy without industrial sector.
B. ECONOMIC CAUSES
4) Disputable Industrial Strategy
It is a huge barrier in the way of
industrial advancement. In the history of Pakistan, there was a policy of
import substitution, in the early 1950s. There was a trend of industrialization
in the 1960s. The policy of Nationalization was adopted in Z. A. Bhutto’s
period and Zia-ul-Haq adopted the policy of Privatization. The investors are
always hesitant to make investment in such situations.
5)
Lack of Mineral Resources
There is acute shortage of mineral
resources like oil and coal etc. These resources are necessary for industrial
development. Due to lack of mineral resources, rate of industrial development
in Pakistan is very low. Contribution of natural resources to GDP is 0.8 % in
Pakistan.
6)
Low Investment and Low Savings
Deficiency of capital is one more
major problem in the way of industrial development. Pakistan is fundamentally,
underdeveloped and there is shortage of capital in the country. Industrial
development is impossible without capital. Sufficient capital is a major
condition for industrial development. Total investment and domestic saving are
13.4% and 9.5% of GDP respectively.
7)
Lack of Technical Know-how
There is lack of technical and skilled
workers in the country due to high rate of illiteracy. Efficiency of labour is
very low due to use of backward and orthodox technology. It is also a main
cause of industrial backwardness.
8) Lack of Infrastructure
The infrastructure for industrial
development is necessary. There is shortage of infrastructure in Pakistan. For
example, gas, electricity, transport, roads, railways network and communication
are not available up to the requirement of industrial development.
9)
Inflationary Pressures
Rate of inflation is very high in
Pakistan. The prices of imported machinery, oils, chemicals and spare-parts are
rising very sharply. These factors contribute toward industrial backwardness.
Very high rate of inflation is 14.1 % in Pakistan.
10) Inadequate Industrial Credit
There is shortage of active financial
institutions in Pakistan, which may provide credit services to industrialists
according to their needs. Terms and conditions for the provision of credit are
so tight.
11) Unfavourable Industrial Structure
There are inequalities in industrial
growth in Pakistan. Manufacturing of consumer goods is preferred over capital
goods. No doubt, return on consumer goods is more but capital goods are
necessary for economic development.
12) Limited Market for Capital Goods
The narrowness of domestic and
foreign markets for the industrial goods is also a major hurdle in the way of
industrial development. Small size of market is due to low purchasing power,
low standard of goods and high cost of production etc.
13) Lack of Industrial Consultancy Firms
The investment in modern industries is
not only costly but also risky. The capitalists are regularly withdrawn and
hesitant in investing their capital in new industrial ventures. No doubt,
deficiency of capital is a problem in Pakistan but the major problem is that
existing capital is not properly utilizing due to lack of consultancy
firms.
14) Lack of Industrial Research
Research work for industrial sector is
not satisfactory due to lack of technical education and shortage of
technological universities in the country. Improvement in production and
reduction in cost of production is impossible due to lack of research. Number
of technical and vocational institutions in Pakistan is more than 1522 out of
which 1140 are in public sector. These are providing training to 3,00,000
persons.
15) Frequent Breakdown of Electricity
Like other power resources, electricity
is also insufficient in Pakistan to meet the domestic needs. There is irregular
supply and frequent breakdown of electricity in Pakistan. It is affecting the
industrial production in the country. Growth rate of electricity and gas sector,
in Pakistan is -21.1%.
16) Economic Sanctions
Advanced countries are not willing
in the improvement of backward countries. They have created various trade zones
among themselves. As a result, they import and export among themselves. So,
export volume of developing countries remains very low. On the other hand,
developed nations have imposed various sanctions on import and export with poor
nations.
17) Global Recession
The global economic recession in the last
years adversely affected the growth of manufacturing sector. The donor
countries usually interfere in our internal affairs and economic activities in
the time of recession.
18) Adverse Balance of Payment
Adverse balance of payment is a new
cause of industrial backwardness. To make industrial development, we have to
import modern machinery and advanced technology from other countries. But due
to shortage of foreign exchange, we cannot import such items to make rapid
economic development. Pakistan is facing the deficit of $ 8.3 billion in its
balance of payment during 2010-11.
A. SOCIAL CAUSES
19) Lack of Education
People have no idea how to set up the
industry due to high degree of illiteracy. They have no sufficient resources to
start heavy projects. Efficiency of unskilled, untrained and illiterate labour
is very low that causes in industrial backwardness. Literacy rate is just 57.7
% and expenditures on education sector are only 1.8 % of GDP, which is lowest
in Asia.
20) Faith & Fate
Man should work hard first and then put
the result in the hands of ALLAH. Mostly, our people are irrational, they
believe on faith and fate. They do not want to take the risks. They are working
just to meet their basic needs. There is absence of commercial mind in
Pakistan.
21) Corruption
Corruption is a great evil, which is
still increasing at very high rate in Pakistan. It is found in government as
well as private sector also. Due to corruption, illiterate and dishonest
workers come forward and cause industrial backwardness. Pakistan is at number
34th at the table of the most corrupt nations and at number 1st
in South Asia.
22) Climate and Weather
Climate and weather conditions are also a
big cause of backwardness in various industries. There is inter-relationship
between industrial and agricultural sector. If weather is not well, it causes
agricultural backwardness and it results in industrial backwardness.
23) Cultural Disturbance
The cultural disturbances in the country
have slow down the production in manufacturing sector. In addition to this,
shortage of raw material has an adverse effect on production. There are various
caste systems in the country.
B. POLITICAL CAUSES
24) Political Instability
An additional cause of industrial
backwardness is political instability. Since partition, political situation of
Pakistan is not satisfactory. There are regular changes in the governments and
government policies. Domestic as well as foreign investors feel risk in making
investment due to political unrest. All these result in industrial
backwardness.
25) Kashmir and Water Issues
Since freedom, the Kashmir problem has
been disturbing our economy. People in Pakistan remain worried about the danger
of war with India due to Kashmir and water issues. So, Pakistani and especially
foreign people hesitate to invest.
26) Burden of Refugees
At the time of partition, Pakistan had to
face a serious problem of refugees coming from India and there was shortage of
resources in Pakistan. But now Pakistan is also facing this problem in
the form of Afghan refugees.
27) Wars with India
The two big wars fought in opposition to
India in 1965 and 1971. It creates a lot of economic problems. Now situation is
that both Pakistan and India has to keep up a huge part of their budget for
defense.
MEASURES
OR SUGGESTIONS TO IMPROVE INDUSTRIAL SECTOR:
The following measures are suggested to
improve industrial sector of Pakistan:
1)
More allocation of funds for industrial research is
required, which is necessary, for the industrial development.
2)
Industrial sector can be promoted by increasing capital.
3)
Saving and investment should be
increased to develop industrial sector.
4)
To promote industrial sector, there should be technical
know-how.
5)
Tax concession is also needed to increase the
investment in new industries.
6)
In time supply of raw material is necessary for the
improvement of industrial sector.
7)
Advanced infrastructure is necessary for
industrial development of Pakistan.
8)
Financial institutions should provide credit facilities
to industrial sector at flexible terms and conditions.
9)
There should be expansion of markets, at domestic
and foreign level, of industrial goods.
10) Foreign
investment should be encouraged; more incentives should be given to
investors.
11) Political
stability is compulsory for the development of industrial sector.
12) High degree of technical
education is required to produce skilled, technical and efficient work
force.
13) Problem of
load-shedding and irregular supply of electricity should be removed.
14) Commercial policy
and self-reliance policy should be adopted to remove industrial backwardness.
15) Foreign exchange
reserves and the balance of payment position should be favourable to develop
industrial sector.
Conclusion:
All above factors are causing industrial
backwardness. Backwardness is not bad but remaining backward is so bad. So,
Pakistan is needed to make industrial development through:
Ø Use of advanced
technology
Ø Development in
infrastructure
Ø Provision of
credit facilities
Ø Increase in
industrial consultancy firms
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ReplyDeleteNice work !
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