Assignment 3

ECONOMIC CHALLENGES
TO THE
Contents INDUSTRIAL
SECTOR OF PAKISTAN
INTRODUCTION:........................................................................................................................ 3

Definition of Economy:.............................................................................................................. 3

REASON WHY I CHOOSE ECONOMIC CHALLENGES:..........................................................4

INDUSTRIAL SECTOR OF PAKISTAN:.....................................................................................4

ROLE OF INDUSTRIES:...........5
Course Title:
MAJOR
Pakistan Studies INDUSTRIES OF

Course Code: PAKISTAN:...............6

MINOR
HUM111 INDUSTRIES OF
Submitted by:
Ali Hussein PAKISTAN:...............7

Registration No.: ECONOMIC

FA18-BSE-105
CHALLENGS FACED
Submitted to:
BY THE Muhammad Tanveer Jamal Dr. Zahid Shah INDUSTRIAL

SECTOR
Submitted to: OF PAKISTAN:........8
FA18-BSE-057
SOLUTIONS TO
Registration No.:
IMPROVE Aiman Sartaj ECONOMY
Submitted by:
CHALLENGES:......13
HUM111
CONCLUSION:......................................................................................................................... 17
Course Code:
Pakistan Studies
REFERENCES:......................................................................................................................... 19
Course Title:
INTRODUCTION:
In 1947, Pakistan had 30 million people with per capita income of 100$. Agriculture accounted
for almost 50% of economic output with hardly any manufacturing, as all industries were located
in India. Therefore, it was unable to feed 30 million people and was dependent on PL-480
imports from the USA. From thereon, Pakistan has come a long way. Today with 170 million
people, our per capita income in 2008 was 1000$ which was ten times more. Pakistan is the
third largest exporter of rice in the world and producing enough food grains to feed its people. 3
million tons of rice is exported every year by Pakistan which is surplus to our requirements.
Pakistan is also one of the five major textile producing countries in the world. So if we measure
in relation to where we were vis-à-vis structure of economy, agriculture has come down from
50% to 20%. Agriculture is not only crops, within agriculture there has been a significant
change. Livestock, dairy, mutton, beef, poultry and similar other products is 50% of agriculture
output in Pakistan. Pakistan also produces third largest quantity of milk in the world. So within
agriculture sector, there is a change i.e. major crops are only 36% of agriculture value added
and 14% are minor crops, fisheries, orchards, fruits and vegetables. Thus, we are moving in a
direction where the same land and same resources are being used more efficiently in order to
produce more. As a contrast, agriculture is only 2.5% in the US having a population of 300
million, out of which they not only feed the entire population, but also export to the rest of the
world. Therefore, it is important to understand that when it is said that agriculture is
producing/contributing more, it is the productivity of agriculture rather than the share of
agriculture in GDP. Manufacturing and industry now account for 25% of the income; when we
recall there was not even a single industry worth its name at the time of partition. So if we look
where we were and where we are, I think the justification for Pakistan in terms of betterment of
economic conditions of Muslims in this part is very strong. But where we have failed is that we
have not lived up to our potential. In 1969, Pakistan exports of manufactured goods were higher
than the combined exports of Indonesia, Malaysia, Philippines and Thailand. In 1960’s Korea
emulated Pakistan in its five years planning process. The tragedy is that even a country such as
Vietnam which was completely devastated by the war has now overtaken Pakistan. Ten years
ago, India which was way behind Pakistan (till 1990’s) is now way ahead. As an economist and
student of globalization, the biggest challenge is: how can we organize ourselves to reach that
position where at least we can be running not at the nine second a mile but at least ten second
a mile 3 race which is going on in the global economy.

Definition of Economy:
An economy is the large set of inter-related production and consumption activities that aid in
determining how scarce resources are allocated. This is also known as an economic system.
Economics is on the one side a study of wealth; and on the other and more important side, a
part of the study of man.” According to Marshall, wealth is not an end in itself as was thought by
classical authors; it is a means to an end—the end of human welfare.
Economic development first became a major concern after World War II. As the era of European
colonialism ended, many former colonies and other countries with low living standards came to
be termed underdeveloped countries, to contrast their economies with those of the developed
countries, which were understood to be Canada, the United States, those of western Europe,
most eastern European countries, the then Soviet Union, Japan, South Africa, Australia,
and New Zealand. As living standards in most poor countries began to rise in subsequent
decades, they were renamed the developing countries.
There is no universally accepted definition of what a developing country is; neither is there one
of what constitutes the process of economic development. Developing countries are usually
categorized by a per capita income criterion, and economic development is usually thought to
occur as per capita incomes rise. A country’s per capita income (which is almost synonymous
with per capita output) is the best available measure of the value of the goods and services
available, per person, to the society per year. Although there are a number of problems of
measurement of both the level of per capita income and its rate of growth, these two indicators
are the best available to provide estimates of the level of economic well-being within a country
and of its economic growth

REASON WHY I CHOOSE ECONOMIC CHALLENGES:

I choose economic challenges because Pakistan has been facing different challenges regarding
to its economy. The economic situation of Pakistan is very critical and people are looking
towards the solution of these challenges faced by the economy of Pakistan. Pakistan has
different opportunities which can help it to solve its economic problem. But without tackling long
term challenges and problems decisively, country will no longer be able to take advantages of
opportunities. Increase in debt, increase in import and decrease in export, low saving, lower
investment, low tax collection, lack of policy implementation, excessive taxation are some of the
challenges faced by the Pakistan’s economy. Some of the solutions of these problems are
offering low interest rate, collection of the taxes, and proper use of young labor force, use of
technology, governance and decentralization. This is quiet considerable to take essential steps
for it.
INDUSTRIAL SECTOR OF PAKISTAN:
“Industry refers to that sector of economy which is related with manufacturing and production of
different products”
Industrial Sector is of great importance for economic development of country. Industrial Sector
is of great importance for economic development of country. It is historical fact that countries
with strong industrial sector have showed more economic growth and development industrial
sector have shown improvement in national income and promoted living standard of population.
 
Historically, Pakistan’s textile industry and clothing sector has always been a major contributor
to the foreign exchange earner and still contributes
4th largest grower of cotton after USA, China and India 3rd largest consumer of cotton 3rd
largest exporter of cotton textiles 2nd largest supplier of cotton yarn with 26% share of the
international market.
Over 1.3 million farmers, out of total of 5million are involved in cultivation of this crop. Industrial
Sector is the second largest individual sector of the economy accounting for 24% of the GDP
Fertilizer is any organic or inorganic material of natural or synthetic origin (other than liming
materials) that is added to a soil to supply one or more plant nutrients essential to the growth of
plants.
Cement industry is one of most prominent and energetic organization having operations and
interactions with cement industry
Pakistan is ranked Pakistan exports 5th in the world’s increased by 47% in cement exports last
fiscal year.5th position leaving 2008-09 Exported Germany behind (20.28 mt) $700m in past
year. At the time of independence in 1947, there were only two sugar factories in Pakistan. At
present there are 106 sugar mills operating in Pakistan. It is the 2nd largest industry in Pakistan
after Textile Industry
Sugarcane acreage in Pakistan is 5th Pakistan ranks 15thtotal of 106 sugar in the World and in
the World for mills it is grown on over sugarcane in the country 1 million hectares production
GDP contribution PER CAPITA (0.7%) CONSUMPTION Employment (26kg) (1million)
 Alcohol (used by pharmaceutical industry) Ethanol (used as a fuel)
 Sports are all forms of physical activity which, through casual or organized participation, aim at
expressing or improving physical fitness and mental well-being, forming social relationships or
obtaining results in competition at all levels”
 FootballCricket batsHockey sticksboxing glovesVolley ball swimming suitsGolf
ballsBadminton racketsBasketballs
The export of sports goods, increased by 7.85% from US$39.180m →US$42.257m last year
Sialkot export 70% of total world demand for hand-stitched inflatable soccer balls (footballs).
40 million balls annually worth US$210 million.
. Companies of various sizes 2,400Employments more than 200,000Exporting goods worth
US$450 millionLarge exporters (more than 250 employees)Medium exporters (100–250
employees)Small exporters (10–100 employees).Commercial exporters (1–9 employees).
Telecommunication is the transmission of information over significant distances to
communicate. Main Categories  Telephone  Mobiles  Internet
 In 2008 Pakistan was the world’s third fastest growing telecommunications market Fixed-line
subscriptions declined from a peak of 5.2 million in 2005-06 to 3.4 million in 2009-10 Pakistan
traffic volume grew by 253 percent compared to last year during the same period
 5% of its Gross Domestic Product has created 220,000 high-paying jobs in Pakistan. Pakistan
is now a leader in mobile usage in south Asia
 PTCL Ufone Warid Telenor Zong Mobilink
The glass industry in Pakistan, though developed, still has space for improvement. There are
about 37 glassworks in the organized sector, with the production capacity ranging between 10
tons and 200 tons per day.
The major ceramics industry are KaramCeramics, Swat Ceramics, Master Tiles, Shabbir Tiles
and Emco Industries. Punjab Baluchistan GDP Contribution 73% 3% Sindh NWFP 5% 19%
Glass industry in Pakistan comprises sixteen manufacturers in the (PAGMA) organized sector
which Pakistan exported produces over 90 per cent of glass products worth the indigenous
production Rs.60 million to within the country. Rs.20 million per annum during imports of various
glass2005-2010, from Rs.975 million to Rs.1, 782 million, during last five years 83%.

ROLE OF INDUSTRIES:
● Major industries of country contribute greatly to the economy of that country.
● They are usually in the formal sector and are usually registered.
● They employee a larger number of employees
● They are usually large and important industries of a country.
● They usually contribute to GDP of a country. 

MAJOR INDUSTRIES OF PAKISTAN:

Cotton textile industry
Agriculture industry
Mining industry
Sugar industry
Cotton-textile Industry

Textile Industry:
The Textile industry in Pakistan is the largest manufacturing industry in Pakistan. Pakistan is the
8th largest exporter of textile products in Asia. This sector contributes 8.5% to the GDP. In
addition, the sector employs about 45% of the total labor force in the country (and 38% of the
manufacturing workers). At present, there are 1,221 ginning units, 442 spinning units, 124 large
spinning units and 425 small units which produce textile. The Textile industry in Pakistan is the
largest manufacturing industry in Pakistan. Pakistan is the 8th largest exporter of textile
products in Asia. This sector contributes 8.5% to the GDP.
Agriculture industry:
Agriculture constitutes the largest sector of our economy. Majority of the population, directly or
indirectly, dependent on this sector. It contributes about 24 percent of Gross Domestic Product
(GDP) and accounts for half of employed labor force and is the largest source of foreign
exchange earnings. It feeds our whole rural and urban population. Realizing its importance,
planners and policy makers are always keen to have reliable area and production statistics of
agricultural crops well in time. Policy makers primarily need accurate and timely statistics for
the important crops such as wheat, cotton, rice, sugarcane, maize etc.
In 2005, Pakistan produced 21,591,400 metric tons of wheat, more than all of Africa
(20,304,585 metric tons) and nearly as much as all of South America (24,557,784 metric tons),
according to the FAO. The country was expected to harvest 47 to 64 million tons of wheat in
2015. Pakistan has also cut the use of dangerous pesticides dramatically.

Mining industry:
Mining is an important industry in Pakistan. Pakistan has deposits of several minerals including
coal, copper, gold, chromite, mineral salt, bauxite and several other minerals. There are also a
variety of precious and semi-precious minerals that are also mined. These include peridot,
aquamarine, topaz, ruby, emerald, rare-earth minerals bastnaesite and xenotime, sphene,
tourmaline, and many varieties and types of quartz. The Pakistan Mineral Development
Corporation is the responsible authority for the support and development of the mining industry.
Gemstones Corporation of Pakistan looks after the interests of stake holders in gemstone
mining and polishing as an official entity. Baluchistan province is the richest in mineral
resources available in Pakistan. While recently Sindh discovered coal deposits in Thar. Khyber
Pakhtoon khwa is rich in gems. Most of the mineral gems found in Pakistan exist here. Apart
from oil, gas and some mineral used in nuclear energy purposes which comes directly under
federal control mining of other minerals is provincial issue. Currently around 52 minerals, are
mined and processed in Pakistan. Khewra salt mines are second largest salt mines in the world.

Sugar Industry:
Sugar Industry is an agro-based industry, which provides employment to the landless rural
population and has a great impact on the economy of the country. it has become the second
largest industry after the Textiles sector. The sugar industry is totally dependent on this raw
material although sugar in the northern areas is also made from sugar beet. Sugarcane is a
labor-intensive crop. It requires about 134 man-days/hectare. Sugarcane cultivation provides
partial and seasonal employment to 3.9983m people approximately, which is about 12.14% of
the total agricultural labor force.
 The general perception of the sugar industry as minting money is not a correct perspective in
the prevailing situation. First of all, it has a seasonal production spell for a period of five months
from November to March. Keeping production flow smoothly coordinated with storing and
maintaining orderly schedules of supplies throughout the year are really complex issues to
tackle.
MINOR INDUSTRIES OF PAKISTAN:
In Pakistan, cottage or household industries hold an important position in rural set-up and are
usually know as minor industries .Most villages are self-sufficient in the basic necessities of life.
They have their own carpenters, blacksmiths, potters, craftsmen and cotton weavers. Many
families depend on minor cottage industries for income. Minor industries have also gained
immense importance in cities and towns. There is great demand for hand-woven carpets,
embroidered work, brassware, rugs and traditional bangles. These are also considered
important export items and are in good demand in international markets.

Sports Industry:
There is an industry to manufacture everything so is for sport’s goods and this is one of those
industries that earn great revenue each year because of the popularity of every sport. In
Pakistan almost all sports related items are produced but the famous products are soccer ball,
cricket bat, cricket ball, tennis ball and some other items too. Sports industry of Pakistan has
even manufactured the soccer ball for the FIFA World cup of the year 1994; this shows that how
demanding the sports industry of Pakistan is in the world market of sports goods. The sports
industry of Pakistan lies in the city of Sialkot which is a part of the province of Punjab. All the
items of sports of the best quality are manufactured in the city of Sialkot and sports industry in
Sialkot is the main factor of Sialkot’s economy as it earns great profit from it due to the high
demand of sports good in international market.

Surgical Equipment industry:

The surgical instruments industry is mainly clustered in and around the skirts of Sialkot. Over
99% of the countries production is centered at Sialkot. The sector comprises over 2300
companies, of which around 30 can be considered large and the remainder can be split as 150
units of medium sized and remaining as small. The industry produces on average over 150
million pieces a year with an estimated value of around Rs.22 billion.

Ancillary Textile Industry:

The ancillary textile industry includes cotton spinning, cotton cloth, cotton yarn, cotton fabric,
fabric processing, home textiles, towels, hosiery and knitwear and readymade garments. These
components are being produced both in the large scale organized sector as well as in the
unorganized cottage / small and medium units. The performance of these various ancillary
textile industries is illustrated as under:-

o Cotton Spinning Sector:

The Spinning Sector is the backbone in the ranking of textile production. At present, as per
record of Textile Commission Organization (TCO), it is comprised of 523 textile units (40
composite units and 483 spinning units) with 13.269 million spindles and 185 thousand rotors.
Installed and 11.083 million spindles and 140 thousands rotors in operation with capacity
utilization of 84 percent and 76 percent respectively, during July –Mar FY 2016.

o Cloth Sector :
There are three different sub-sectors in weaving viz, Integrated, Independent Weaving Units,
and Power loom units. There is investment in the shuttle-less looms both in integrated and
independent weaving sector. This trend is likely to intensify in the country. The power loom
sector modernized and registered a phenomenal growth over the last two decades. The growth
of power loom sector is due to favorable government policies as well as market forces. The
production in Non-Mills Sector is not reported and therefore is estimated. The Table 3.4 shows
production and export of clothing during the period under review.

ECONOMIC CHALLENGS FACED BY THE INDUSTRIAL

SECTOR OF PAKISTAN:
Debt Servicing:
A recently produced data of the State Bank showed the country paid $6.820bn as debt servicing
in FY14, including $5.910bn as principal amount and $915m as interest. This $7 billion debt is
presenting great challenge to the economy of Pakistan. The main cause of Pakistan’s budget
deficit is the huge amounts of debt servicing. The government, trapped in floods and political
crisis, may face another serious turmoil by the end of this fiscal year if IMF and other donors did
not release the promised loans. The gravity of the situation is visible in the wake of increasing
trade gap, with no foreign inflows, no release of installments from IMF and no interest of foreign
investors in the country. The disappointing foreign investment has developed another difficult
situation under which repatriation of profits and dividends on foreign investments have also
reached close to $1bn Pakistan succeeded to borrow from international market, though at a
very high rate, but it boosted the country’s image, encouraging IMF and other donors to help
Pakistan. However, situation seems to have changed again as exports have dropped, and
imports jumped by 32pc in the first two months of the current fiscal year and rupee has lost 4pc
value to hit Rs102-3 against the dollar. Though remittances are increasing at the rate of more
than 12pc, it would not be enough to absorb the future shocks.

Fewer saving and more consumption:

In Pakistan, as the earnings of people is not too much as compared to their expenses so people
consume more and save less. As the savings in Pakistan is less than consumption so
investment rate in Pakistan is too low. Low investment means low growth of economy.
Investment provides capital to the industries and performs a key role in the economy of any
country. Low investment provided a great challenge to the economy of Pakistan. According to
one survey every Pakistani consumes 85 from every hundred rupees. This thing indicates that
the saving rate is too low in Pakistan. In India the saving rate of last year is 34%, while the
saving rate of china is 50% for last many years which play a key role in the success of china’s
economy.
Government spends more and collects less:
The major issue of Pakistan’s economy is that the government of Pakistan spends more than it
earns, which force to government to run its budget in deficit. As government spending is higher
than its earning, so for fulfilling deficit of budget the government has to borrow money, which
presents another economic challenge in the form of debt servicing payments. In 2013, Pakistan
budget deficit is more than 7%, which means that Pakistan earnings is 13% and its spending is
20%. The major spending of Pakistan economy is in the form of education, infrastructure and
most importantly in the form of defense expenses. According to one survey Pakistan spends its
70-80% budget in the form of defense expenses. Pakistan recorded a Government Budget
deficit equal to 8 percent of the country's Gross Domestic Product in 2013. Government Budget
in Pakistan averaged 3.14 Percent of GDP from 1990 until 2013, reaching an all-time high of
8.80 Percent of GDP in 1990 and a record low of -8 Percent of GDP in 2013. Government
Budget in Pakistan is reported by the State Bank of Pakistan.

World Trade:
In 1990s, the share of Pakistan in the world trade is .2%, which remains now, .12%. This thing
indicates that our share in world trade is shrinking year by year. While if we look at the share of
India in world trade then we come to know that it has doubled its share in world trade till 1990-
2010 by .7%-1.4%.our exports are limited in some sectors like textile, wheat and rice. Our
exports are limited to only some countries, like, U.S, U.A.E, and Australia etc. As our share in
the world economy is shrinking year by year, so, it encourages us to import more and export
less. This is presenting great challenge to Pakistan economy.

High Load shedding:

Energy plays a role of backbone in the industry of any economy. The most worst economic
challenge face by Pakistan’s economy is load shedding. Because of load shedding Pakistan’s
economy face many challenges. Because of load shedding the industries in Pakistan are
shifting to other countries. Because of load shedding, not only Pakistani investors but also the
foreign investors are discourages to invest in Pakistan .load shedding has destroyed the large
businesses as well as small businesses. Energy crisis has not only affected the general public
but it also effected government indirectly. Because of mobilization of businesses from Pakistan
to other countries, government revenue decreases in the form of tax collections. As the quantity
of businesses decrease, so unemployment increases and government has to pay more in the
form of unemployment compensations. Due to load shedding government spending also
increases in the form of energy development plants. Another challenge we face today is energy
and water shortages, and that is not because we are not generating enough electricity or we are
not having enough water. With the losses of KESC from the point it has generated to the point
they realize the billing is 45%, so 55% people are paying for those who are stealing the
electricity. Government of Pakistan out of its own limited resources is paying 200 billion rupees
every year as subsidies for electricity. Our industry is at a disadvantage that they get the orders
from foreign countries but they cannot execute the orders because there are electricity outages.
In addition to economic losses it also creates inconvenience for pursuing normal life. We have
silting of our dams, but no additional dams have been constructed since Tarbela in 1974. We
have water course losses of about 20-25%.
We Consume More and Save Less:
Out of every hundred rupees of our national income, we consume 85 rupees and save only 15
rupees, which means that the amount of money which is available to invest for economic growth
and advancement is too little. Because to grow by 6%, you need at least 24-25% investment
rate - and if you want to rely on domestic savings, your saving rate should be 25%. India’s
saving rate was about the same, but last year they recorded 34% saving rates. China’s saving
rate is 50%, so this is the contrast as to why we are in serious difficulty because as a nation this
is a problem which we have to recognize. We have to at least double on savings rate otherwise
we will remain dependent on foreign sources.

We Import More and Export Less:

Till 2007-2008, 80% of our imports were financed by our export earnings. This ratio has come
down to only 50%, it may go up to 60% but a gap of 40% of financing needs in order to keep
with the import level still exists. As a nation we prefer to use even the basic commodities of
foreign countries rather than locally manufactured goods. Unless we do not change this attitude
of preferring the imported goods we have to keep on relying on outsiders to fill in this gap b/w
our imports and exports. Relying on outsiders’ means that there are cycles, ups, and downs i.e.
when things are good, one gets financing, and when things are bad one starves for financing.
No nation which 4 strives to preserve its honor must go through this particular route. The lower
is this gap between our export earnings and expenditure on imports - and that can be achieved
only by expending our exports; our reliance on external sources would be reduced.

Government spends more than it earns as Revenues:

Fiscal deficit is the difference between the revenues which are collected in a year and the total
expenditure incurred by the Government. Pakistan’s government takes away 20% of national
income as its own. 80% is left in the private sector and 20% in the hands of the government is
spent on defense, debt servicing, development on education, health, general administration etc.
The revenue generated is only 15% of the GDP at best, and in the worst days it is 12 to 13%.
Out of the every rupee of income received by a Pakistani, on average, tax paid is only 9 paisa
and 91 paisa remain with the individual. In 2007-2008, Pakistan’s fiscal deficit was more than
7% which means its income or revenues were only 13% of GDP whereas, expenditures were
20%. Therefore, fiscal deficits have to be financed from somewhere, so how do you finance
them; you either go again begging the external donors, or to the State bank of Pakistan. The
financing provided by the State bank of Pakistan is dangerous because it creates high inflation
in the economy, which is injurious to the middle class, those earning fixed wages and salaries,
and the poor. Therefore, there is an uproar in the country if the inflation rate goes up. In 1999,
our Debt to GDP ratio was 100%, which means that the entire national income was pledged as
debt. Every single penny was pledged to the creditors. This ratio was reduced gradually over
next six to seven years and 5 brought down to 50%, an average for all the economies. However,
the way the things are going for the last two years, it has moved from 50% in last two years to
58%, and with all the borrowings it may go to 60%, while the Fiscal Responsibility Law 2005
says, that the government should not exceed the debt GDP ratio more than 60% and is required
to reduce it by 2.5%; and that is not happening. The reason the fiscal deficit is widening is low
revenue collection. How can you expect that only nine paisa out of every rupee of income
generated by Pakistani population suffices to meet the requirements of defense, infrastructure,
development, debt servicing etc. This is just not possible. In India, tax GDP ratio is 15% and still
they have fiscal deficit. So Pakistan is way below the norm for developing countries. Many
people say that defense takes away a lot of government expenditure. Whereas, the fact is that
defense expenditure is only 20% of government expenditure. It is only 4% of GDP, and is not
such a large expenditure as compared to debt servicing which is 7-8% of GDP and almost 40%
of government expenditure. Therefore, government has to contain its fiscal deficit by raising
revenues. Agriculture incomes are exempt, professionals, retailers, wholesalers, transport
owners and many other service providers evade taxes by paying a small fraction of what is due.
Continuing large fiscal deficits year after year may plunge the country into debt trap again.

We Badly Lag in Social Indicators:

One of the most glaring weaknesses is that a country like Pakistan that should have had best
indicators in literacy, infant mortality, fertility rates, in access to water supply, in primary
enrolment ratios has social indicators which are more comparable to Africa rather than to the
countries of similar per capita income. Even Tajikistan, which is a very poor country, has better
literacy rate and primary enrolment ratios than Pakistan. What does it means? It means that if
we had literacy rate of 100% instead of 55%, then in 2009-2010 our per capita income would
have been 2000$ rather than 1000$. Instead of 30 million middle class in Pakistan we would
have 60-70 million middle class people; we would have poverty reduced to 15-20%. We have
committed to achieve the millennium development goals by 2015 i.e. we will be able to reach
80-85% literacy rate, but it is doubtful that this will happen. Why do we have 7 regional
inequalities? Why Baluchistan is lagging behind other provinces? It is because of literacy rates
and primary enrolment ratios. There is a direct correlation between regional inequities and
backwardness with the level of education.

We Face Energy and Water Shortages:

Another challenge we face today is energy and water shortages, and that is not because we are
not generating enough electricity or we are not having enough water. With the losses of KESC
from the point it has generated to the point they realize the billing is 45%, so 55% people are
paying for those who are stealing the electricity. Government of Pakistan out of its own limited
resources is paying 200 billion rupees every year as subsidies for electricity. Our industry is at a
disadvantage that they get the orders from foreign countries but they cannot execute the orders
because there are electricity outages. In addition to economic losses it also creates
inconvenience for pursuing normal life. We have silting of our dams, but no additional dams
have been constructed since Tarbela in 1974. We have water course losses of about 20-25%.
Even after these losses, the water is inequitably distributed. The influential land lords are able to
take greater share of water from the canals as compared to poor farmers. Therefore, the
productivity of poor farmer is only one ton per acre as compared to 3 tons by large holders. If we
provide the water equitably to the small farmer, he would also be able to increase the
productivity from one to at least two tons resulting into additional income, increase in exports of
food grains, cotton and fruits and vegetables which will add to export earnings of Pakistan. With
the climate change taking place with all the 8 glaciers in Himalayas which are going to melt, we
are going to have difficulties in future due to global warming.

Cost of Doing Business is high:

Pakistan is ranked among the bottom half of the rankings of the countries where cost of doing
business is quite high. It is not high for any particular reason but because of our bureaucracy
totally sitting on their seats without taking actions or decisions in time. Unless there is some
pressure or incentive for them, the normal businesses particularly the small and medium
businesses have serious problems at the hands of bureaucracy. Even if we have investors who
are welcomed by the federal government, when it comes down to provincial and local
governments there are given a run around – the land is not available, the water is not available,
the gas is not available, electricity is not available, road is not available. Lack of coordination
among various government agencies, innumerable laws and regulations that are antiquated and
outdated have proved to be serious impediments. Labor laws, inspections by multiple agencies,
the delays in the court system, infringement of intellectual property rights and evasion of taxes
by competing firms in the informal sector have rendered some of the well established firms
unprofitable, or the feasibility of starting near ventures questionable.

Crisis of Governance and Implementation Weaknesses:

If we glance on policy documents of various governments on education, agriculture, health,
trade policy etc. and look at the same policy forty years ago and the problems, there is hardly
any significant record of implementation of those policies or plans over this period. We produce
five years plans and all kinds of medium term frameworks, 9 but it is the poor governance and
implementation that are the weak links in getting things done. Unless we strengthen civil
services and bring about a merit based system of recruitment, promotion, performance
evaluation, compensation, disciplinary action, etc., we will not be able to see any difference in
the quality of governance. Orders are given by the higher ups but they are not carried out;
summaries are approved, but they remain buried in the files and therefore; whether it is
education, health, water supply, revenue or law and order, you can pin down the problem to the
governance issues. Unless we fix the governance issue, the economy is not going to take off at
the speed which is required.

Uncertainty and Unpredictability due to Lack of continuity:

Every government whether military or non-military personnel begins with a fresh start, as though
nothing occurred before them and nothing will occur after them. This isn't the way this present
reality works. You take the activities and projects which were started by the past governments,
assess them concerning what the qualities and shortcomings were, fix those shortcomings and
convey them forward. It will take just couple of years to carry these acquired undertakings to
finishing and the nation will profit by new engine ways, new ports, roadways, instructive
foundations and so on. Be that as it may, habitual pettiness of progressive governments results
into sudden end of every such task and projects. At the point when these are continued the
expense has heightened multiple times and it takes a few extra years to finish them. In the in
the interim the general population of Pakistan endure in light of this absence of progression. At
the point when looked with such unconventionality about the future, the financial specialists are
considering whether they ought to put resources into this nation as they are questionable
whether the new 10 government when comes in would stop or modify what the past government
was doing, or cling to the responsibilities made to them. Take the case of Higher Education
Commission, which was sending 1700 understudies for PhDs abroad yet the new government
comes in and suspends the financing of those projects. This unraveled down the procedure of
workforce improvement for our colleges when we ought to have been sending twice the same
number of researchers.

Political Stability:
The general curving topic is that for a powerful economy we ought to have political steadiness,
peace and security. The Armed Forces of Pakistan merit appreciation for what they have done
in Malakand Division to achieve strength to the extent the peace circumstance is concerned.
The sooner the nation is disposed of this picture of political flimsiness, poor peace circumstance
and instability, whereby speculators from everywhere throughout the world dither in coming to
Pakistan and contribute, we won't almost certainly gain any ground in this nation. In 2007,
Pakistan was a standout amongst the most loved nations among the global speculator network.
A multiyear bit of paper was glided which a bond for Pakistan to be paid in 2037 and Pakistan
was got multiple times over membership at a value which was just 300 premise focuses over
the US treasury. Not very many nations can profess to have that sort of believability with
universal reserve directors. In any case, in two years' time we have missed that vessel. Hence,
it is basic that we continue the voyage which has been hindered by sustaining a steady, secure
and tranquil political condition.

SOLUTIONS TO IMPROVE ECONOMY CHALLENGES:

How can we overcome these challenges and problems and improve our economy? A lot has
been written and talked about, but I will focus on only a few action points.

Change in National Psyche and Mindset:

We as a nation are too much negative oriented and too much cynical where we find everything
wrong in this country. Unless we change our mindset and unless everybody who is doing what
he is supposed to do, carries out his or her task with sincerity and honesty, we are not going to
go anywhere. We should not expect any Messiah to come and fix our problems we have to do it
ourselves individually and collectively. There are no short cuts available. Media is muddying the
water by their sensational stories and inviting so called experts who contribute in projecting
negative thinking and negative national psyche. Unless we have a positive “can do” mentality, it
will be difficult to progress. Unless each one of us changes our mindset rather than blame the
government and the system, we are not going to go anywhere in this race for global economic
survival. This is easier said than done. But I expect our younger generation to be more
responsive and responsible.

Building up of Human Capital:

There is no substitute to building up human capital. Private sector, public sector, NGOs, local
communities, philanthropists etc. all here to put their hands on deck and participate in making
sure that every child goes to school. Every high school graduate has some technical and
vocational skill or goes for higher education. Unless we build up human capital, 12 we are just
going to be left behind because the world economy is going to be a knowledge based economy.
It is not an economy where you memorize material or reproduce that in the exam and forget
about it - that is no longer the case. One has to acquire the knowledge and use it in order to
apply to problem solving. This is a new paradigm where human capital is as important as
machinery and equipment. Pakistan lags behind other countries in the institutions, infrastructure
and incentives for human capital formation. We have no choice but to accelerate the pace to
catch up with others.

Nuclear Technology:
Nuclear technology be properly used in this regard. No doubt, this technology contributes very
low quantity. But Pakistan should try to get maximum benefit of it.
This all is possible when there is strong system of checks and balances.
If the energy crisis is solved, it would not only facilitate the local industrialists but also foreigners.
Similarly, latest technology must be introduced to our industrial sector. Concerted efforts will
have to be made towards moving the industry into a higher technological orbit to produce value-
added goods that are competitively priced in the international markets. To enable industrialists
to up-grade their technology, import of new machinery and equipment should be exempted from
import duty and sales tax. In addition, keeping in view that not all manufacturers may have the
necessary resources to invest in brand new machinery and equipment, import of second-hand
machinery may be allowed.

Skilled Laborers:
In addition to latest technology our industry needs skilled laborers to run modern machinery.
Without skilled laborers modern machinery would be of no use to run our industry. For his,
technical institutions, on the basis of the modern industrial needs, be established. In these
institutions, experienced teachers be engaged. These teachers can train laborers through
modern scientific techniques cater to the requirement of our industry. Last but not least,
industrialist must be given loans on easy installments so that they could extend their business
keeping in view the moderns demands of globalizations.

Provision of electricity:
We should create power by those assets which are inexhaustible. Government should mindful
the general population to purchase those merchandise which are vitality proficient. Government
should mindful individuals to control light utilization. Government ought to enable individuals to
actualize little plants on their homes for creating power for their selves. A ceaseless observing,
reconnaissance and review of both Hydro and Thermal Power age units. An outsider
administrative consistence of Independent Power Producers (IPP's) on a never-ending premise.
Checking of stock so burglaries and pilferages are avoided of heater oil which has prompted
lower quantities of intensity age. Inconvenience of exacting money related punishments on
inability to lead vitality reviews and poor execution of influence plants. Change over to less
expensive powers to chop down the power age rates and resulting expulsion of appropriation.
Development of new dams on the keep running of the stream in order to guarantee that there
are no floods during rainstorm and the nation is set up to battle the water war set by India on
Pakistan.
Economic revival of State Owned Enterprises:
The Economic survey of Pakistan reports that during FY12 and FY13 the power Shortage
became so severe that it wiped out 2% from the country’s GDP. Agriculture, Manufacturing as
well as Services sector performed below their capacity”. In addition to the energy crisis, the
below par performance of State Owned Enterprises has been a major concern. The shady
privatization of these state owned enterprises in the past have actually led to worsening of
economy and if the country goes for another string of poorly executed privatization, the ethical
standing of the government would be lowered but the quality of life of the country would be
lowered beyond repair. Decline in Foreign remittances, depletion of reserves, and stagnant tax
collections all suggest that the economy needs more careful review and constant watch. If left
unattended the fiscal deficit will increase and result in lowering of GDP. The government should
increase the privatization in those sectors which are not in more profits or which have fewer
investments from public. If government wants to increase the profits of such kind of institutions
then it may privatize these sectors. Government should also do privatize the railway sector.
Because if the government privatize the railway sector then it will be able to collect private
investment .by the privatization of railway the workers of railway try to work more efficiently
because of the fair of firing from job and railway works more efficiently. The further benefit of
privatization is that people are begun to invest their money.

Increase exports and decrease imports:

It is prescribed that the administration recognize holes and evacuate aggravations which has
prompted decline in outside inflow and increment in remote surges. A year ago, the Pakistan
economy enrolled 23.5 % in oil and gas part for outside inflows pursued by Financial Business
and Communications which pulled in 18.1 and 10.6 percent, individually. The outpouring was
seen in interchanges and power divisions. In spite of the worldwide lull, the uptrend in KSE-100
file energized outside interest in financial exchange. The Karachi Stock Exchange (KSE) is
relied upon to anyway around 26,000 or more focuses.
Export plays an important role in every country’s economy, influencing the level of economic
growth, employment and the balance of payments. Lower transport costs, globalization,
economies of scale and reduced tariff barriers have all helped exports become a bigger share of
Pakistan’s national income. In 2015, exports of goods and services accounted for 13% of GDP.
Growth in exports can create employment. For example, the growth in textile sector exports
have created many job in the past, such as Azguard9 factory in Lahore, and Sitara Group in
Faisalabad. Traditionally export jobs have been in manufacturing industries – an important
source of full-time employment, especially in industrial regions. In recent years, exports have
become more diversified with a greater reliance on service sector based exports. Exports are a
component of aggregate demand (AD). Rising exports will help increase AD and cause higher
economic growth. Growth in exports can also have a knock on effect to relate ‘service
industries’. For example, the success of commodities like Leather goods & surgical items will
help the local economy to grow. Similarly a fall in exports, during a global economic downturn
can have a big negative impact on Pak economy. The strength of exports has a large role in
determining the current account deficit. In the past few decades, Pakistan has had a persistent
current account deficit, which many attribute to the Pakistan’s relative poor export performance.

Use of Technology:
The technology is spreading like a rapidly spreading fire. What number of individuals five years
prior could have believed that even in a communities and towns of Pakistan, one would access
to cell phones. 95 million Pakistanis have cell phones today. You can utilize this innovation so
as to give those financial administrations, data on atmosphere/climate, agribusiness
augmentation, wellbeing, training and so forth. It is an incredible asset which can jump a ton of
time which we have squandered. Utilizing innovation especially the data/correspondence
innovation for the improvement of social and monetary issues of Pakistan is something which
should be done however it is impossible the manner in which we have compartmentalized this
into various services. An increasingly all-encompassing and complete methodology that sends
innovation for neediness decrease must be set up. Technological advances have significantly
improved operations and lowered the cost of doing business. Currently, as an example, just a
few technicians controlling robotic systems can operate an entire manufacturing plant, and
innovative inventory systems are capable of supplying needed parts within a short time for
assembly. Advancements in the computer industry, coupled with advancements in
telecommunications, have increased job opportunities and strengthened economic growth.
All physical barriers to communication over distances have been properly overcome by the
internet. In a similar way, manufacturing and consumer goods companies have developed
online links to their suppliers and customer support. Suppliers can keep track of production line
efficiencies through automated systems and can more efficiently ship parts and materials to the
required locations, reducing inventory and downtime. In addition to that ecommerce and online
banking capabilities have also helped reduce the cost of doing business. The impact of
technology economy in the market is very significant, infusing even the measurement of the
market economy. Some of the largest indexes known in the market, such as the Dow Jones
Industrial Average (DJIA) and the S&P 500, have changed. Tech powerhouses like Apple,
Google, and Amazon, whose stocks are valued much higher than those of many long-time
industrial members, are replacing large industrial super companies. Apple, with its high market
capitalization, accounts for such a large share of the DJIA, for example, that any hiccup in its
quarterly earnings can move the entire index, situation that was once done by other large
corporations such as GM and Caterpillar. Technology has an amazing power of permeate
companies. An important measurement of the technology economy is the observing the
Worldwide IT. 

Young Labor Force:

Pakistan is one of the few countries which has a young labor force which can be harnessed for
its own and global economy. Japan, Europe, USA and after 2050 China are going to have aging
population where the 13 ratio of old to young people is going to increase. India and Pakistan are
two countries where the ratio of younger people to the older ones is going to increase. If we tool
these young men and women properly, we increase the female labor force participation, give
those skills and knowledge, they can become the labor force for the rest of the world. This will
give a big boost to Pakistan’s own economy. In 2001, worker remittances were less than a
billion dollars; today we have almost 7-8 billion dollars. Now this can be multiplied by three or
four times if we have educated labor force i.e. skilled labor force going for overseas
employment. This is also a way to create employment opportunities because if you have large
number of younger people coming to labor force and you don’t have job opportunities for them
you can have social upheaval. Therefore, it is imperative to create employment opportunities for
them and one of the avenues is to train them in the kind of the skills which are needed not only
by the national economy but also by the international economy.

Special Emphasis on Economic Development:

There are extortion, ransoms, target killing, terrorism and bomb attacks which has not helped
the cause of economic revival and sustenance in Pakistan. (Burki, S. J. (2007). Changing
perceptions, altered reality: Pakistan’s economy under) 3. Conclusion: Economic growth in
Pakistan, like other countries of the world, is subjective to the health of the world economy, but
is principally reliant on domestic factors, policy, weather, and the nature of state-economy
relations. Pakistan may not have achieved macroeconomic stability, sustainable economic
structural reforms, or improved economic governance but it has resumed the journey for poverty
alleviation, improvement in health and education sector and may in the days and years to come
improve its current standing. Last but not the least the economic performance for the year 2014
may not be that different than previous years as the monetary and fiscal policies are somewhat
still not in balance and the current government is prone to misuse the critical concept of
publishing new rupee notes. However if the Government is able to monitor and provide
leadership to the country in the domains of macro-economic stability, structural reforms, good
governance, strengthening of financial institutions , poverty reductions and improvement in
health and education, it may help Pakistan achieve its economic potential and help earn a
respectable place in the comity of nations.

Governance, Devolution and Decentralization:

As the population is increasing, one cannot govern Pakistan sitting in Islamabad, Karachi,
Lahore, Peshawar or Quetta. One has to devolve powers, decentralize and delegate authority,
provide resources to the local/district governments so that they can take decisions at their own.
Those decisions would be very much in accordance with the requirements and the needs of
those communities. Sitting in Islamabad one cannot visualize what is needed in Chaghi or
Loralai, but the people in Loralai and Chaghi know exactly whether they need water, fertilizers
or fruit processing industry. Let us devolve powers to the people at the grassroots level 14 and
there would be much better allocation and utilization of resources. There must, however, be
accountability of the local governments by the provincial governments and of provincial
governments by the federal government but not interference or usurpation of powers. If we do
that, then a lot more can happen with same amount of resources which are being wasted today,
and the etc.
An aggressive skills training program and a certification system for existing skills must be
started. Where existing program are functioning well, they must be expanded.

CONCLUSION:
The industrial sector and energy are directly proportional/inter-dependent on each other.
Without one sector the other is of no value. Therefore, to beat the time it is necessary that
Pakistan’s both sectors be brought at the level required by the developed countries of the world.
We have very experience of China and India having the world largest population are emerging
as powerful countries in the world. The reason behind that they have come to know how policies
be made and be implemented. Therefore, Pakistan needs to follow their way of emergence. If
Pakistan can borrow money from world countries then why not their policies for the betterment
of the country. Firstly, the government should focus on other resources besides water. For
example wind, nuclear, tidal, solar etc.
Secondly, the four provinces of the country are said to be the limbs of Pakistan. They should
work together for the welfare of the country. For example, the proper utilization of natural
resources lying in different parts of the country and the royalty over them to be paid by centre to
promote inter-provincial harmony. 

Thirdly, proper implementation of Indus Basin Treaty as signed in 1960. The World Bank played
its role as arbitrator between India and Pakistan. Therefore, India should be pressurized from
World Bank to abide by the treaty.

Further, nuclear technology be properly used in this regard. No doubt, this technology
contributes very low quantity. But Pakistan should try to get maximum benefit of it.

This all is possible when there is strong system of checks and balances.

If the energy crisis is solved, it would not only facilitate the local industrialists but also foreigners.

Similarly, latest technology must be introduced to our industrial sector. Concerted efforts will
have to be made towards moving the industry into a higher technological orbit to produce value-
added goods that are competitively priced in the international markets. To enable industrialists
to up-grade their technology, import of new machinery and equipment should be exempted from
import duty and sales tax. In addition, keeping in view that not all manufacturers may have the
necessary resources to invest in brand new machinery and equipment, import of second-hand
machinery may be allowed.

In addition to latest technology our industry needs skilled laborers to run modern machinery.
Without skilled laborers modern machinery would be of no use to run our industry. For his,
technical institutions, on the basis of the modern industrial needs, be established. In these
institutions, experienced teachers be engaged. These teachers can train laborers through
modern scientific techniques cater to the requirement of our industries.

REFERENCES:
 Industries of Pakistan by Hanan Falak, US
 The Strategy of Economic Development by Albert Hirschman
 The Theory of Economic Growth by W Arthur Lewis
 Wikipedia, Industries of Pakistan
 Issues in Pakistan's Economy Third Edition
 A Political Economy Perspective by S. Akbar Zaidi
 Zaidi, S. A. (2005). Issues in Pakistan’s Economy. Oxford University Press Karachi,
Pakistan.
 UK Essays. November 2018. Imports And Exports On The Economy Of Pakistan
Economics Essay.