A View of Pakistan's Industrial DevelopmentAuthor(s): Sandra RichardReviewed work(s):Source: Asian Survey, Vol. 5, No. 12 (Dec., 1965), pp. 590-595Published by: University of California PressStable URL: http://www.jstor.org/stable/2642651 .Accessed: 05/03/2012 23:38

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A VIEW OF PAKISTAN'S INDUSTRIAL DEVELOPMENT

SANDRA RICHARD

Capital goods industries will receive major emphasis in Pak- istan's industrial sector under that country's Third Five-Year Plan (1965- 70). Increased industrial output has been a major objective of the Govern- ment of Pakistan in its plans for economic development. In this essay, we will direct our attention toward (1) achievements in industrial production since partition; (2) government policies which guide industrialization; and (3) questions to which policy makers and planners should give especial consideration. A chievements

In 1947, Pakistan possessed considerable resources in raw materials, such as cotton, jute, bamboo, hides, and oilseeds, but had little domestic capacity for processing them. The country's industrial firms consisted of several cotton textile mills, a large shoe factory, an electric steel-smelting furnace, a few cement and sugar factories, and the railway workshops which have manufacturing facilities. Among the small-scale producing units were less than 900 small factories which processed raw materials for export, less than 400 small mills for converting food crops, and a few light engineering works.

By the end of 1963 the country had reached self-sufficiency in the fol- lowing items: aluminum and brass utensils, biscuits, cigarettes, razor blades, bicycle tires and tubes, small diesel engines, and some types of electric wire and cable. Sporting goods, cutlery, and surgical instruments are among the nation's exports. An oil refinery has begun production, and two others have been authorized. Two steel mills have been sanctioned by the government which, if they materialize, should meet 70% of the country's requirements. In the chemical-fertilizer industries, manufactured products include soda ash, caustic soda, superphosphate, and viscose rayon; the chemical in- dustry is now moving into petrochemicals and other synthetic fibers. The foundry and rolling mill of Pakistan's largest engineering works turn out semi-automatic looms, lathes, presses, slow-speed diesel pumps, deep-well pumps, and electric transformers and batteries, paints and varnishes, and soap. Opel and Ford Consul automobiles are assembled, and the assembly of Mack trucks has been sanctioned.' While the country's industrial base has broadened, the contribution of the industrial sector to the Gross Na- tional Product (GNP) rose from 7.5% in 1950-51 to approximately 13% in 1963-64.

1 See P. H. M. Jones, "Keeping a Jump Ahead," Far Eastern Economic Review, 43:1 (Jan. 2,1964), 16-19.

590

SANDRA RICHARD 591

Government Policy The explicit aims of the twenty-year Perspective Plan-which incorpo-

rates the Third Five-Year Plan within its framework-are the following: (1) a tripling of GNP; (2) elimination of dependence on foreign assistance; (3) provision of full employment; (4) parity in per capita income of the two regions; and (5) universal literacy.2

In regard to industrial investment, the general policy is to provide maxi- mum encouragement to private investment-including foreign private in- vestment-in all fields of industry except the manufacture of arms and munitions, production of atomic energy, railways, air transportation, and telecommunication. Among the measures which have been instituted to stimulate private investment are the following: (1) an import policy aimed at widening the industrial base of the economy by emphasizing importation of industrial raw materials and machinery; (2) provision of credit facili- ties; (3) provision of industrial estates; (4) protection from foreign com- petition; and (5) tax holidays and concessions. The government declares that it invests in other industrial ventures only when private initiative is lacking-with the intention of disinvesting as soon as possible.

The process of industrial development in Pakistan can be divided into three phases: (1) the phase between 1947 and 1955 when no formal plan was followed; (2) the First Five-Year Plan period from 1955 to 1960; (3) the Second Five-Year Plan period from 1960 to 1965. Industrial growth in the initial phase was regulated by the immediate needs of the time, as reflected by the rapid growth in jute and cotton textiles, both of which are based upon local materials, and which could be produced by semi-skilled workers, and provide needed foreign exchange upon exporta- tion. In the second phase of industrial development, the decisive criteria were foreign exchange benefits and increase in national income and employ- ment, plus a greater emphasis on consumer goods industries to meet do- mestic demand. The introduction in 1959 of an export bonus scheme- which allows a certain proportion of the value of exports to be utilized in importing machinery and spare parts-has proved very successful for the expansion of export trade and the development of Pakistani domestic in- dustry. During the third phase of development, special consideration has been given to producer goods industries. Outlook for the future is expressed in the government's reply to a UNESCO questionnaire:

. . . the present thinking of the Government and other tendencies pre- vailing in the economy indicate that in the next ten years there will be accelerated growth of those industries which have greater importance for the long run development of the economy, such as mineral resources, steel, machine tools, shipbuilding, automobiles, aircrafts, railway coach

2 Government of Pakistan, Outline of the Third Five-Year Plan (1965-70), Aug. 1964, p. 17.

592 PAK I STAN'S I N DUSTR IA L DEVE LO PM E NT

and wagon building, light engineering, heavy chemicals, basic pharma- ceuticals and machine tools.3

The government's industrial endeavors have been undertaken primarily through the semi-public, semi-autonomous Pakistan Industrial Develop- ment Corporation, which has recently been separated into the West Pak- istan IDC and the East Pakistan IDC. Of the total planned investment in industry during the Second Five-Year Plan, the government expects to contribute two percent in the public sector and about twenty-seven percent of the total investment in the semi-public sector. The WPIDC alone can boast of investment in more than a dozen industries: jute, paperboard, heavy engineering, shipbuilding, chemicals, pharmaceuticals, fertilizers, sugar, cement, coal, exploitation of marine fisheries, industries based on forest products, development of cottage and small-scale industry, refractory products and clay products.

However, the government seems to be aware of the country's limitations in industrial development. In its reply to the UNESCO questionnaire, the government stated:

Shortage of foreign exchange and of technical and managerial personnel and inadequate transport and power facilities are the principal bottle- necks encountered at the present stage of industrial development in Pakistan.4

Questions for Especial Consideration Measures designed for the country's economic development may be con-

sidered as an experiment, for its plans depend upon long-term loans and other forms of aid from other countries. The results of the experiment probably will not be known within the lifetimes of the planners or the lenders. Thus, any objective appraisal of Pakistan's industrial development policies-a significant part of the over-all planning-is difficult because of the following reasons: (1) decision makers are operating in an area of un- certainty and (2) information which serves as the bases for decisions may be available only to persons who are directly concerned with policy formu- lation. Questions can be raised, however, which might serve as reminders or cautions to policy makers.

To the limitations which are acknowledged by the government, as de- scribed in the preceding section, may be added the following: (1) Pakistan suffers from the absence not only of a skilled and disciplined work force, but also a lack of appreciation on the workers' part of the concept of quality in the goods produced. (2) Jute and cotton textiles represent a considerable

3 Reply of the Government of Pakistan to the United Nations Economic and Social Council Questionnaire on Industrial Planning and Development, dated by the UN as March 7,1963 (mimeo.), p. 27.

4Ibid., p. 26.

SANDRA RICHARD 593

portion of the country's products for export, yet substitute products are being found for jute; and the international cotton textile industry is highly competitive. For example, a leading industrialist admitted that his textile mill sold products at less than cost on the international market in order to earn bonus vouchers for foreign exchange; the difference could be made up in the domestic market. The highest quality cotton textiles are usually made in part with Egyptian or American cotton if either is available. (3) Factories representing heavy industry seldom work at maximum capacity. For example, a foreign auto assembly plant-before selling out to the father-in-law of President Ayub's son-was operating at 50% of capacity because of insufficient licenses for importing parts for assembly. Also, the nation's largest engineering works was reported to be working at 40% of capacity.5 The shipyard with its well-equipped foundry was working at far less than capacity. Comments were expressed by industrialists about the poor quality of products of the shipyard and the engineering works. The above limitations raise the questions whether the country can afford the waste associated with idle capacities and poor quality products and whether encouragement of the machine tool industry, shipbuilding, or aircrafts is a wise policy for the coming decade.

The problems associated with automation must not be overlooked by the policy makers. Industrialists are being forced to purchase the most modern machinery since (1) governmental policy is export-oriented, yet inter- national markets are quality conscious, and (2) the work force lacks disci- pline and training. Moreover, certain industries that are being encouraged- such as the petroleum refinery or the factories in the chemical industry- are highly automated operations. Concerning the latter point, planners should initiate a detailed study of capacity utilization of existing units in the chemical, pharmaceutical, and paper industries. Reducing unemploy- ment in Pakistan in the next twenty years may have to be recognized as an artificial objective.

While Pakistan's development may be limited by a paucity of technical and supervisory skills, foreign exchange, and an undisciplined work force, it can boast of a small but active entrepreneurial class. If firms owned by foreigners, Hindus, government, and semi-government agencies are ex- cluded (one-third of the total), more than half of the industry is controlled by small minority groups of traditional trading communities.6 The profit- oriented members are mobile geographically and industrially. The role of these entrepreneurs has been possible because of governmental policy in making industrial investments attractive.

Policy makers should be encouraged to consider the question of changing the direction of industrial development. Since the country has now broad-

5 Jones, op cit., p. 17. 6 Gustav F. Papanek, "The Development of Entrepreneurship," American Economic

Review, 52:2 (May 1962), 54.

594 PAKISTAN'S INDUSTRIAL DEVELOPMENT

ened its industrial base, planners should evaluate the following possibilities: (1) concentration on improving inefficiencies in production of existing in- dustrial units and slowing down the numerical expansion of new units; (2) expansion of those industries which can be supplied by local materials or skills even though small-to-medium scale production units7 may be re- quired. Major opportunities for continued industrial development may depend upon domestic resources. Since Pakistan's most valuable resource seems to be the entrepreneurial spirit of its tradal-background minority groups, provision of investment measures by the government to make these industries-based on local materials or skills-attractive could prove to be a more realistic long-term policy.

As much has been said already concerning inefficiencies of production, attention will be turned to the latter consideration. First of all, the planners should investigate the operations of the Council of Scientific and Industrial Research to determine if positive contributions are being made in uses of local materials or if the organization is weakened by bureaucratic ills.

Second, research at the Ahsanullah Engineering College in Dacca has revealed that oils and activated carbon can be extracted from rice husk or rice bran. Other studies indicate that jute sticks contain a material of pulp for paper, activated charcoal, and filler for plastic moulding powder. The economic feasibility of utilizing the rice husk and jute sticks for industrial purposes deserves investigation.

Third, increased production of certain commodities which are presently being manufactured, deserves attention for export possibilities. Present capacity in the paper industry has been estimated as insufficient to meet the growing demand. Manufacture of paper from sugar cane residue has begun, and manufacture from bamboo is being considered.8 Paperboard production-used in packaging and in the printing and publishing indus- try- can now meet local demand by using bhabhar grass and rice straw in its manufacture. The green marble of West Pakistan has been converted into a resource recently, primarily as the result of a study published in November 1963, by the Department of Trade Promotion and Commercial Intelligence. Its possibility as an export industry deserves particular con- sideration. Skilled workers have produced sports goods and cutlery and surgical instruments for export. If manpower requirements can be met in these industries, and if international demand seems adequate, manufactur- ing facilities could be expanded. Handicraft items-such as footwear, embroideries, hand-loomed silk, block-printed textiles-might enjoy an

7 Employing manual labor without use of any motive power; or using motive power but employing not more than twenty persons or using fixed assets valued at not more than Rs. 100,000.

8 See "Industries Based on Natural Resources," Industry and Natural Resources (Karachi), 2:12 (Oct. 1963), 27-43; and M. A. Nasser, "Development of Industries Based on Local Resources," The Asian Economist (Chittagong), 1:12 (April 1963), 19-23.

SANDRA RICHARD 595

international market if economic incentives were provided for entre- preneurs to organize and to promote such products. Attempts at coordinat- ing handcraft production thus far have been made primarily by charitable organizations or semi-public agencies.

These questions have been raised for consideration before Pakistan's Third Five-Year Plan is underway. The present thinking of the planners is to give more emphasis to capital goods industries to ease the foreign exchange problem. The planners have recognized the shortage of technical and managerial personnel, but have they also recognized the significance of the shortage in heavy industry? An intensive study is needed into the effect of this shortage upon the waste that is occurring in poor quality prod- ucts and underutilized equipment. Concentration on more efficient utiliza- tion of present facilities is suggested until the human resources can be trained-including the qualities which characterize a disciplined work force-to supply the engineering and other heavy industries. Provision of incentives to attract entrepreneurs-Pakistan's major resource-to the smaller scale industries based upon local materials and skills deserves the planners' immediate attention.

MISS SANDRA RICHARD is an Assistant Professor in Production Management at Haile Selassie I University in Ethiopia.

Article Contentsp. 590p. 591p. 592p. 593p. 594p. 595

Issue Table of ContentsAsian Survey, Vol. 5, No. 12 (Dec., 1965), pp. 575-628Front Matter [pp. ]Achievement Orientation, Social Self-Identity, and Japanese Economic Growth [pp. 575-589]A View of Pakistan's Industrial Development [pp. 590-595]Chinese Regional Stereotypes [pp. 596-608]Tuva [pp. 609-615]Li Tsung-Jen and the Demise of China's "Third Force" [pp. 616-628]Back Matter [pp. ]