Pakistan Ayub Khan (1958-1969) – Glory Years

 Replace President Iskander Mirza in a coup in 1958.

 Supported President Mirza's decision to impose martial law against PM Feroze Khan's in 1958.
 At that time Pakistan was self-sufficient in food whereas India was deficient; however, Pakistan was deficient in
heavy industries.
 Main reason for growth; continuity at the top.
 GDP growth - 6.8%; Industrial Production growth – 17% (1960-65) and 10% (1965-70);
 Mainly import substitution in textile, sugar, cement, light engineering and consumer goods. Light industry
developed successfully by 1968.
 Green Revolution: seed technology (Mexi-Pak wheat, Irri Rice); Indus Basin Scheme – Mangla Dam; Kaptai Dam in
West Pakistan. Agricultural Development Bank was set-up to provide agriculture financing particularly for
modernization of agriculture.
 Pakistan Industrial Credit and Investment Corporation (PICIC) and Industrial Development Bank of Pakistan (IDBP)
established to provide project finance and technical advice to entrepreneurs. USD loans from IBRD and US Govt.
 PICIC established with World Bank Assistance, had area specialists to guide and formulate industry-specific strategy.
Condition was 30% of the company was to be listed on stock exchange
 Rapid growth in banking industry (HBL, UBL, MCB, National). UBL was first bank in the region with computerized
operations
 Finance Minister, Muhammad Shoaib, was from finance and accounts section of the civil service, excelled in
planning and understood finance.
 National Investment Trust (NIT) and Investment Corporation of Pakistan (ICP) set up as Investment funds, to support
Capital issues and galvanize KSE.
 2 dozen industrial conglomerates . Professionally managed with delegation of authority
 Fastest growing EM along with Brazil, Turkey and Mexico; FDI in pharma, finance, oil and gas and light engineering
 South Korea adopted 2nd 5-year plan
 Automobile sector booming with various brands of cars and trucks assembled by 1968
 Planning Commission: reported directly to the President. Was responsible for infrastructure development including
dams

Ayub Khan – Reversal

 Too much too soon which lead to failure to follow through
 Model of growth circled around functional inequality.
o Few industries were focused on through concessions and subsidies without strategy
o Concentration of profits
o 22 families had 67% of the country’s wealth
o Favored sectors given lower exchange rates and subsidies/ lower duties
o Foreign exchange earned from export of West Pakistan (Mainly jute) to develop East Pakistan
 Heavy industry/value-added goods not developed so machinery needed to be imported -> high reliance on loans/aid
to meet FCY needs.
o Active participation in manufacturing and trading from public sector required like steel in India, Japan and
Korea
o Industrial import subsidies
o Relative advantage of cheaper labor offset with high cost of imported machinery
 Industrial growth mainly sideways mainly due to failure of Planning Commission.
 Suppression of Union power and low wages.
 Local products and brands not developed to compete with global standards.
 Post 1965 Indo-Pak war, aid reduced by 25% -> fiscal deficit increased by 100%.
 Policies not for common man
o Unemployment rose post 1965
 o Wages declined
o Favoritism granting licenses to developed relationships with politicians
 Laid down foundation for politicians being largest business owners in Pakistan
 Export ban on agriculture & cap on agriculture prices -> stunted growth of agricultural sector
 This resulted in formation of Pakistan People’s Party (PPP)