Current industrial problems/challenges

and solutions for Pakistan

 Table of Contents
INTRODUCTION.................................................................................................................... 1
FINDINGS AND DISCUSSIONS............................................................................................ 1
Energy Crisis.................................................................................................................... 2
Declining foreign direct investment................................................................................ 2
Poor management and corruption.................................................................................. 2
Natural disaster................................................................................................................ 3
Technological backwardness.......................................................................................... 3
Raw material and import tariffs....................................................................................... 3
Political instability............................................................................................................ 4
Inconsistent policies........................................................................................................ 4
Issues of labor.................................................................................................................. 4
Shortage of capital to install or maintain industries...................................................... 4
Poor infrastructure........................................................................................................... 5
Impact of covid-19 on industrial sector.......................................................................... 5
Textile Industry............................................................................................................. 6
Tourism Industry........................................................................................................... 6
Manufacturing Industry................................................................................................ 6
Sport’s Industry............................................................................................................ 6
CONCLUSION AND RECOMMENDATIONS........................................................................ 7
REFERENCES...................................................................................................................... 8
 Current industrial problems/challenges and
solutions for Pakistan
INTRODUCTION
Pakistan's industrial sector contributes about 24% to the national economy and accounts for 20 percent of GDP.
The year 2018 recorded 5.80% growth compared to 5.43% growth last year. Pakistan is ranked as the 55th
country in the world with the highest factory output. Industrial employment (% of full-time employment) in
Pakistan reported 23.67% in 2019, according to a set of Development Indicators, compiled from officially
recognized sources.

Pakistan has a fast-growing local manufacturing and manufacturing sector with a large percentage of its exports,
and firms compete with international exporters for their prices. The industrial sector mainly consists of;

Surgical Equipment for Sports

Fabrics

Transportation

Cutting trees
Cement

Handicrafts

Marbles & Gems Fruits & Dried Fruits Vegetables

Marine Livestock
Financial Services It & Telecom
Skin visits
FINDINGS AND DISCUSSIONS
Pakistani industries are not moving forward in development and industries are not focusing on the authorities.
Pakistan has been facing financial difficulties since independence in 1947.

The following are some of the major problems the Pakistani industrial sector has been facing and some solutions
to
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Energy Crisis
The industry is almost caught hostage because of the energy crisis. The country is facing an energy crisis. Power
outages have become commonplace in the world's major industrial cities. Officials have identified gas shortages
of 10.34 billion cubic meters per day in the 2015 financial year. that if this rate of inflation continues, energy
demand could double before 2015. The crisis of critical energy almost stifled the industry, creating widespread
dissatisfaction in business circles. This could lead to the closure of many industrial units and an increase in
unemployment in the war-torn country. The country loses at least 2 percent of GDP growth annually due to
power shortages.

Debts throughout the energy chain or circular debt continued to increase with the absence of a power sector
transformation program. Round debt has now reached Rs400 billion. The circular debt crisis arose as a result of
the difference between the cost of electricity production and the tax levied on consumers, which forced the
government to provide subsidies. The government has failed to close the gap in electricity production costs and
utility bills. The high cost of furnace oil forced the government to raise electricity tariffs, but consumer fees are
still believed to be lower than energy costs. Expensive energy, especially in the commercial and industrial
sectors, will boost inflation, pushing more people into greater trouble in the country.
Declining foreign direct investment
The main reason for concern among foreign firms is already investing in the country. The
country desperately needs overseas investment to strengthen the industrial process. Rising
violence has not only disrupted Islamabad's efforts to attract foreign investors but will also
affect industries in the country. It will also force foreign firms to stop working in the country.
Robbers, targeted killers and dacoits have turned the country's business center into a hotbed
of crime. Legal and regulatory problems in some metropolitan areas have affected business
and industry activities that have slowed global economic growth.
Government should not try to control industrial development but should make policies in
consultation with the private sector, which should be seen as a growth engine. What the
government needs to do is to develop a private finance workplace and sustainable industrial
development. It should encourage new investment, especially foreign direct investment
(FDI). It must improve

competitiveness and improved productivity through macroeconomic and industrial

management.
Poor management and corruption
Good governance ensures transparency, efficiency and order in the use of public funds and national resources,
promotes the growth of the private sector, promotes the effective delivery of public services and assists in law
enforcement. There is a strong correlation between individual income and personal growth indicators such as
adult education, life expectancy, infant mortality, political and social rights.
Natural disaster (decreases yield, destroys infrastructure)

Natural disasters have a profound effect on social and economic well-being. Using timeline data from 1975 to
2010, the effects of natural disasters on Economic Growth (GDP Growth, Growth in Industrial Production and
Growth in Agricultural Production) were estimated. In this study, the ADF test was used to test the Stationarity
series and then the OLS method used to measure the impact of natural disasters. The results showed that natural
disasters reduced GDP growth by 1.483 percent, agricultural Production Growth by 1.625 percent, and
Industrial Growth by 2.1 percent the following year. This is because industrial yields are declining and
infrastructure is being destroyed.
Technological backwardness

While industries around the world have long invested heavily in modern machinery to increase productivity,
many Pakistani industries are clearly embarrassed to follow suit.

In the country, the oldest milling machines, textile electronics, printing presses, grain mills, and tanneries are
still in operation. As a result, it is experiencing moderate global degradation and low unit production in all of
these production areas.

Replacing older equipment requires timely testing of older equipment and good forecasts for targeted
investment returns. That, of course, requires not only skilled engineering staff but also remote management.

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Raw material and import tariffs
Reduce high imports of raw materials and machinery as it has increased the cost of industrial imports including
export-oriented industries and the impact of industrial competition due to poor production and exports.

Pakistan's gross domestic product has been reduced from 20% in 2001 to about 9% in 2014, as a result of which
exports from US $ 9.2 billion to US $ 25 billion show an increase of more than 170. However, since 2014, tax
relief has been offset by a gradual increase in import taxes due to exports. The government should reduce import
tariffs and regulations on the development of raw materials for industries and machinery that will enable the
domestic industry to develop, produce more products and improve exports that have led to faster economic
recovery.
Political instability
In the history of Pakistan no government could have completed its position without the previous government.
There is political instability in Pakistan. Due to the state of law and lawlessness, terrorism, bombings, racial and
ethnic tensions, inconsistent economic and industrial policies etc. Instead local investors move their money to
Dubai and other countries around the world.

This disrupts industrial, industrial and economic growth and is overshadowed by political problems. Industrial
success cannot be guaranteed as long as leaders put aside their political interests and focus on the development
of Pakistan.
Inconsistent policies

The Department of Industry and Manufacturing says you have that information, so far you have never bothered
to share it with the nation. Therefore, the second reason for the industrial decline is that managers do not provide
policy makers with the information they need most.

If consistency is brought about in the policies of the industrial sector and a well-planned structure is built, a
smooth and prosperous industry can be expected as well as a transparent and corrupt system of foreign
investment.

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Issues of labor
Aside from the small investment in modern technology, the country is also lagging behind in investing in
business skills, tech skills and data skills.

- three sections of the Global Skills Index (GSI) that measure national production. Pakistan ranks disappointing
57th out of 60 countries listed for GSI levels in the 2019 GSI report. China and India occupy 36th and 50th
positions respectively. Pakistan's spending on education - which includes skills development and vocational
training - is also below 2.4% of GDP. The public financial investment of the public sector is also at an
embarrassing low of 4%, according to a recent annual report by the State Bank of Pakistan of FY19.

Clearly, there is a need to raise the level of Pakistan's GSI and that can only be achieved through investment in
human resources and equipment.
Shortage of capital to install or maintain
industries
Lack of capital is a major hurdle in the way of establishment of heavy industries in
Pakistan. There is shortage of both kinds of monetary and physical capital. In
Pakistan, savings rate is hardly 13% to 14% which is very low. Pakistani society is
basically consumption oriented.

The investors are not provided with sufficient and reasonable amounts of loans. The
banks follow strict conditions and tedious procedures while advancing the loans. The
bank loans are granted to big and affluent persons while the small businessmen are
discouraged by in a number of ways, for example, by charging the higher interest
rate.
There are numerous solutions which may help to generate capital. The capitalists
are often shy and hesitant in investing their capital in new ventures. If marketing and
technical services are provided for channelizing their investment among competing
industrial units, they can come forward for investing the capital in different avenues.

Poor infrastructure
The transport sector, constitutes 10 percent of Pakistan's Gross Domestic Product
(GDP) and provides 6 percent of the employment in the country, also plays a vital
role in development of other industries. As most of the industries require
transportation of raw material or processed goods from factories to ware houses and
from ware houses to different stores and then to the outlets. This transportation may
be within cities or countries or

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continents or intra-continents. Hence to assure a ones part in market share, Pakistan
should ensure the development of infrastructure.
Impact of covid-19 on industrial sector
Corona virus has similar impact on Pakistan’s industries as it has on human body. It
has worsened the initial problems. While the developing economies are suffering
from huge financial blows, the total external debt of Pakistan as of March 2019 is
already $105 billion with additional burden of bonds, whereas our currency is
depleting drastically against dollar. The year 2019 along had added the debt of over
$13 billion, which is over 40% of the total debt added in last 10 years.

In the wake of these crisis, Pakistan’s initial economic losses incurred in different
sectors of the country’s economy have been estimated at Rs1.3 trillion, on account
of drop in the GDP growth because of reduction in services sector including airline
business, hotel business, retail businesses, hoardings, FBR’s revenue loss, massive
decline in imports, exports, reduction in remittances, disruption in food, mask and
sanitizer’s supplies etc. the exports might face loss in the range of $2 to $4 billion as
export orders had got cancelled. E-commerce is the only factor which is operating in
this crises and can be improved for aiding many industries.

We can also say that consequences of short comings of our industrial sector are
intensified. Whether it’s the energy crises, lack of capital, declining foreign
investments, management disabilities, short comings of raw materials or
insufficiency of policies. Particularly the labor issues are worst. As due to lockdown
the laborers are directed to stay at home and most of our industries cannot operate
at all without laborers. This has caused a strain in our industrial production. Then the
lack of technological advancements puts a barrier to the only possible way out of this
crises. While other countries are going for ‘working from home’, our industries are
not enough equipped for that.

The impact of Covid-19 on major industries is discussed below;

Textile Industry
The whole textile sector is in deep crisis due to unavailability of basic requirements,
cotton analyst Naseem Usman said. The ginners shared the same ideas and said
that the ginners were disturbed as mills were on the sidelines due to prevailing crisis
in the world, he added. Textile retailers and outlets are closed and there is a
complete disruption in entire domestic textile supply chain, putting at risk jobs of
thousands of factory workers.

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Prime Minister Imran khan has rightly allowed certain construction and textile
industries to partially operate them. Similarly, partial opening of textile outlets with
extreme care should be allowed. Restriction on the movement of the textile workers
should be eased to reach them to factories. Similarly, there is also a need on the part
of the textile sector to evolve and adapt themselves with the changing circumstances
as well. They should introduce online shopping facilities through android mobile apps
and website orders. Businesses need to understand that the future is for those who
are working with the pace of time. Digitalization has become a need of the hour and
in these unusual scenarios, it has become even more inevitable to use digital tools in
our businesses to keep them afloat.

Tourism Industry
Due to halt in the air transport, the tourism industry which had a great scope of
improvement has totally crippled.
Manufacturing Industry
The large- scale manufacturing (LSM) had shown negative growth of 1.15 percent in
February due to sluggish economic activities in the country. The LSM, which
constitutes 80 percent of manufacturing and 10.7 percent of the overall GDP, had
recorded negative growth of 3.03 percent during eight months (July to February) of
the current fiscal year.
In auto sector, tractors production went down by 35.98 percent, light commercial
vehicles 46 percent, trucks 48.9 percent, jeeps and cars 45.67 percent and
motorcycles 10.27 percent during the period under review.
Sport’s Industry
Sports Industry’s 15% firms can be categorized as ‘Large’ establishments and these
cater to the global renowned brands including Adidas, Nike, Puma and Reebok. The
industry is export oriented, with 59% firms exporting their products to international
markets. Outbreak of coronavirus has put this industry to a halt due to no import
activities and cancellation of many national and international sports events.

The government had set LSM target of 3.1 percent for the year 2019-20. However,
the government would not achieve the LSM growth target due to the performance of
major industries in first eight months of the current fiscal year. According to the PBS,
production data of 11 items from Oil Companies Advisory Committee had registered
a negative growth of 0.81 percent in July to February period of the year 2019-20.
Similarly, the LSM data, provided by the Ministry of Industries and Production for 36
items, had also shown negative growth of 1.81 percent during the period under

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review. However, the data provided by the provincial Bureaus of Statistics for 65
items had recorded negative growth of 0.42 percent over the same period.

CONCLUSION AND RECOMMENDATIONS

As there is no cure or preventive medications of Covid-19 similarly its impact
on industrial sector cannot be prevented. Though measures to minimize it can
be fruitful.
By now we should be able to provide e-learning and through it we can
increase the workers who can work from home. By reducing the on field
workers, yet we need to mobilize our factories with all preventive measures
suggested by WHO. This should be considered as an eye opener that how
backward our industry is due to lack of technological advancements.

The Government must focus on improving current power, especially as for

present day endeavors including nearly nothing, medium or gigantic. The
advanced game plan should be facilitated towards extending the segment of
the collecting zone in the hard and fast economy. A reasonable
Industrialization Policy should be point by point giving a fantasy for the
advanced economy for both the short-medium and medium-long stretch.
The Government must make an effort not to control modern turn of events yet
it must make sense of techniques in meeting with the private segment, which
must be considered as motor of development.
Government ought to improve the working condition for private theories and
conservative mechanical unforeseen development. It should stimulate new
theories, particularly the outside direct Investment (FDI).
REFERENCES
https://www.coursehero.com/file/24790592/Problems-and-
solutions-of-industrial-sectordocx/
https://www.google.com/search?

source=hp&ei=EwCcXo6wB6SHjLsPqoyEsA0&q=industrial+solutions&oq=

industrisl+sol&gs_lcp=CgZwc3ktYWIQ

http://www.rcci.org.pk/wp-content/uploads/2012/12/igtip.pdf
https://blog.pakistaneconomist.com/2018/02/08/industrial-
development-pakistan-issues-challenges/
http://jworldtimes.com/magazine-
archives/jwt2016/october2016/industrial-sector-of-pakistan-
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