Posted by : Ahsan Khan 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.
 PROBLEMS OR CAUSES OF INDUSTRIAL BACKWARDNESS:
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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