1 Textile Industry

1.1 Significance
1. The textile industry took birth in 1957 after the Korean war merchants
bought spinning machines.
2. 60% devaluation in currency after Imran Khan took office revived this
industry.
3. Numerical Data
 60% of the total export revenue comes from textiles.
 38% of the labour force is employed.
 8.5% contribution to GDP
 4th largest producer of cotton

4. Labour is cheap and raw material is domestically available.

5. International brands are working with local manufacturers.
 Pakistan is famous for its t-shirts and towels.

6. It Doesn’t require much-skilled labour hence opportunities for unskilled

workers.

1.2 Problems
1. Unsustainable competition
 Exports are increasing because of cheap labour, electricity, and stimulus
packages.
 It is not sustainable as we are competing based on price. What if they start
to rise again?
 Bangladesh is using new machinery and skilled labour. Whereas Pakistan
is using obsolete machinery.

2. Highly subsidized
 Porter said that government intervention is damaging in the long run, and
this industry is thriving on taxpayer’s money
 Government is forced to give stimulus package as a major chunk of
foreign exchange comes alone from this industry.
 They are paid relief packages, which are still used to buy old machinery
instead of latest to gain economies of scale.

3. Demand Problems
 Demand for blended fabric is increasing, but the demand for cotton fabric
has remained stagnant for a long time.
 Our production is based on cotton hence our domestic demand is not
anticipatory of foreign demand.
 We are producing low value-added products such as t-shirt and towels.

4. Poor Raw Materials

 Sugar cane is taking space for cotton production, and the yield of cotton is
falling.
 Small staple length cotton leads to a poor yarn.
 Pakistan has naturally short to medium staple length which leads to
coarse yarn.
 Coarse yarn doesn’t allow us to manufacture high value-added products
  Moisture in cottons reduces the quality of cotton and our plucking process
is weak
 Mostly plucked by woman who are carrying babies with toffees in their
hands
 Fibers from woman’s clothes contaminate the cotton
 Cotton is placed in a jute bag which gets mixed with cotton. Polythene
bags were introduced to cater to this problem.
 Plucked cotton is spread on the wet ground which increases the moisture.
 Farmers are becoming aware that moisture increases the weight of cotton.
Hence, they intentionally add water in it

5. Lack of Government support

 There is not much research taking place in Pakistan.
 A 6% rebate was provided by the state bank to do research. However, it
was not at all spent on research.
1.3 Solutions
• Start working on man-made fibers as our main market has a
demand shifting towards it.
• Institutions should start producing skilled labourers.
• Research and development should be done.
• Try to target Asian markets by conducting trade expos.
• House jobs should be done after getting the theoretical education.
• Zoning of spinners and producers

1.4 Why is textile a good starting point for a developing

country?
• Machine is standardized. No heavy technology is required which
keeps changing with time.
• Easy to comprehend and understand.
• Economies of scale are abundant as it is labor intensive.
• Developing economies have cheap and abundant labor available.

1.5 Process
• Ginning: extracted cotton from the seed. If this process is not good,
the final product will not be good.
• Spinning: converting cotton fibers into yarn
1. Pakistan has one of the greatest spinning facilities
• Weaving/Knitting: Household items or garments are manufactured.

1.6 Factor Conditions

• Contaminated cotton
1. World average is 2% while we have 8-10% contamination
2. Sugar cane is taking up space for cotton production, and the yield of
cotton is falling.
3. Moisture in cotton reduces the quality of cotton and our plucking process
is weak.
4. Mostly plucked by women who are carrying babies with toffees in their
hands.
5. Fibers from women’s clothes contaminate the cotton.
6. Cotton is placed in a jute bag which gets mixed with cotton. Polythene
bags were introduced to cater to this problem.
7. Plucked cotton is spread on the wet ground which increases the moisture.
8. Farmers are becoming aware that moisture increases the weight of cotton.
Hence, they intentionally add water to it.
9. Small-scale farmers hold back the supply until they have enough to sell it
together. The piled-up cotton gathers dust and impurities increase.

• Poor staple length o Small staple length cotton leads to a

poor yarn.
1. Egyptian thread is 60-120 count yarn because they have a greater staple
length.
2. Pakistan has naturally short to med
3. Coarse yarn doesn’t allow us to manufacture high-value-added products
4. International demand is of T-shirts which requires coarse yarn

• Cheap Labor o Labour productivity is important, not cheap

labour.
1. Our labour takes 6 hours for one shirt compared to 3 hours for one shirt
abroad.
2. Cheap and productive labour is what’s going to result in high yield.
3. Cheap labour is not something to be happy about, as this signals low
standards of living.

• Government and private sector absence

1. There are no major institutions available to upgrade the factors involved.
2. The skilled and intelligent labour is not even interested in the 60% export
revenue generator industry.
3. Clash between the spinners and producers.

1.7 Demand Conditions

• Demand can be divided between the final garment and spinning
and weaving
• Domestic demand V/s international demand
1. The spinning and weaving industry enjoys stable demand which results in
a low incentive to upgrade.
2. Local demand is for printed fibers. Printing hides the coarse yarn defects.
3. Foreign demand is of sophisticated colors which is hard to manufacture as
it require a good quality yarn.
4. We are trying to cater US and UK with our printed designs when we should
be doing it in Asia. o Our demand domestically and internationally is of
course yarn. Hence, no motivation to move towards value addition.

•The international demand is shifting more towards synthetic fibers

while we still fail to produce good quality cotton products.
1. 18% of the spindles in Pakistan are in use of synthetic fibers. Whereas it is
40% in India.

1.8 Structure
 • Traders started as spinners and now have vertically integrated into
producers.
• Industry giants are the only ones who can change the structure of
the industry as they have the required skills and experience.
• It's mostly spinners and weavers who are giants. Garment
manufacturers are mostly small-scale.
• Garment manufacturers don’t have the necessary finance and are
labour intensive.

1.9 Multi-fiber agreement

• Textile is the most controlled and regulated industry in the history.
• An agreement was made by developed countries in which quotas
were placed on each developing country so that a single giant
would not emerge out of them as it would ensure uniform growth.
• Quotas were lifted in 2004, and it became a purely competitive
industry.

2 Dairy Industry
2.1 Importance
• Numerical data
1. 3 rd largest herd size in the world
2. 4 th or 5th largest milk producer in the world as per different articles
3. 44% employment of the labour force
4. 11.5% contribution to GDP

• Provides social security in the rural areas

1. Milk has the easiest liquidity (slaughter or sell the cow)
2. Provides employment opportunities to women as they are heavily involved
in caretaking of animals o World bank report concluded that majority of
Pakistanis would have been malnourished if it was not for milk being
produced in rural areas.

• Raw Material
1. Major supplier of raw material to the leather industry, especially on Eid
2. Horns are used in pharmaceutical industry
3. Cow dung is an important source of electricity generation. A plant has
been setup in the Bhains Colony.

2.2 Structure of Industry

• 70% of the production takes place in rural areas
• Small scale subsistence
1. 27-28% of rural dairy farms are subsistence farms.
2. They mostly use it to fulfill their own needs, and any surplus is sold to
neighbors.

• Small scale market oriented

1. 3-4 animals.
2. They have a goal of selling it in market.
3. Corporations usually get their milk from these farmers as it is cheap, and
they also give them awareness and training.
• Rural commercial production system
 1. 2.5-3% share, mostly regulated by the corporations.
2. Imported breeds such as jersey, Holstein are kept here.
• Peri-urban production system
1. They provide milk to big cities.
2. Bandy payment system with the farmers where the price of milk is set for
a year.
3. Remaining milk is sent to lee market where the price is decided on the
basis of demand and supply
• Commercial farms
1. Corporate giants get their milk from rural areas
2. Nestle from Punjab
3. Olpers from Sindh

2.3 Demand Conditions

• Numerical Data
1. 27% of the total expenditure is on milk and milk products
2. Around 60% of the milk comes from buffaloes, 37% comes from cows
3. Highest per capita consumption in Karachi
• Value added products
1. Yogurt, Lassi, butter, ghee, cheese
2. Cheese has a massive potential in Pakistan as currently only 50% of the
demand is being catered by in home production.
3. Tea whitener is also in demand as Pakistanis are tea lovers.

• International V/s domestic demand.

1. Foreign world demands cow milk as it has low fat content. However,
Pakistani love high fat content milk o Vegetable oil is often added to meet
the demand for cream
2. 92% of the milk sold in Pakistan is raw milk, which is banned
internationally.
3. 1% pasteurized
4. 2% milk powders
5. 5% UHT
6. Lack of awareness on what constitutes a good quality milk.
• Gap in demand and supply
1. Lean period during summers, and lush period during winters.
2. Gap in demand is met by milk powders.

2.4 Factor Conditions

• Basic Raw Material: Cattle
1. 96% of the milk comes from buffalo and cow
2. Remaining comes from goat and sheep
• Feeds: o Bread, Biscuit, choker, Khalni are processed feeds
1. There is no concept of feed in rural areas, animal grazes on its own in
fields.
2. Importing agriculture products but not the by-products has increased feed
prices.
3. Rise in oil prices have increased the transportation costs as feed
producers are at a distance now o Mechanization of agriculture processes
has led to less by products.
• Breeds o Pakistan once had the finest breeds. However, unregulated
cross breeding has resulted in loss of original breeds.
 1. It used to export Sahiwal breed, but it is now nowhere to be found.
2. Smuggling of animals to Afghanistan during Eid seasons
3. Slaughtering of calves because they reduce the milk available from
mother cow, and their meat is soft which increases its demand.
4. Some of the buffalo breeds are Cholestane, Neeli, Ravi, Kunde
5. Neeli Ravi is a “black gold”. If taken care of properly, it is the best income
generation method.
6. Cows breed are Sahewal, Red sindhi, Tharparkar
7. Pakistan exports international breeds such as Holstein, Jersey, etc.
8. These exported breeds are not used to climatic conditions of Pakistan.
Hence, special conditions such as AC, sprinklers, temperature-controlled
environments are needed to increase their milk yield
• Unhygienic conditions and improper handling
1. They are not allowed to move or sit freely which results in low yield
2. Spread of viruses such as foot and mouth disease are spread easily.
3. Cow dung everywhere
4. Oxytocin Injections are being used on animals to increase yield
5. No proper data handling on input and output to monitor animal’s
productivity

• Veterinary facilities are poor

1. Animals are not vaccinated or properly quarantined when they are sick
2. 8 doctors for 400,000 cattle in Bhains colony.
• Productivity o Per cow milk productivity is around 5 liters in Pakistan,
whereas it is 35 liters per day in developed world.
1. We are still the 3rd largest producer. If we were to improve these
conditions, we’d easily become net exporters and world’s largest
producer.
2. A Germany cow produces 5 times more milk than a Pakistani cow.

2.5 Problems
• Collection of milk is a big challenge in rural areas
1. Must go from home to home.
2. Milk is perishable item and has an expiry of only 6 hours.
3. Hydrogen peroxide is added to preserve poisonous milk
• Unhygienic conditions and improper handling
1. They are not allowed to move or sit freely which results in low yield
2. Spread of viruses such as foot and mouth disease are spread easily.
3. Cow dung everywhere o Oxytocin Injections are being used on animals to
increase yield
4. No proper data handling on input and output to monitor animal’s
productivity
• Veterinary facilities are poor
1. Animals are not vaccinated or properly quarantined when they are sick
2. 8 doctors for 400,000 cattle in Bhains colony.
• Breeds of Pakistan
1. Pakistan once had the finest breeds. However, unregulated cross breeding
has resulted in loss of original breeds.
2. It used to export Sahiwal breed, but it is now nowhere to be found.
3. Smuggling of animals to Afghanistan during Eid seasons
4. Slaughtering of calves because they reduce the milk available from
mother cow, and their meat is soft which increases its demand.
• Rising Expenses and regulated prices of milk o Importing agriculture
products but not the by-products has increased feed prices.
1. Rise in oil prices have increased transportation costs as feed producers
are at a distance now
2. Mechanization of agriculture processes has led to less by products.
3. Government regulates the price of milk, but not the price of feed.
4. Buying a cow has become as expensive as 3 lacs, which provides a
lactation period of only 6 months on average.

2.6 Solutions
• Employ literate people in the dairy industry
• Start cooperatives farms
• Training and education of rural farmers
• Government subsidies
• Marketing campaigns to shift towards UHT and pasteurized

3 Fertilizer Industry
3.1 Importance
• 0.4% direct contribution to GDP
• Industries are heavily reliant on the performance of this industry.
For example, agriculture, textile, etc.
• Provides food security o Feeding mouths are increasing. 1 kg of
fertilizer translates into 8-10 kg of grain.
1. Fertilizers use has increased by 101% which has led to an output increase
of 58% whereas land under cultivation has only increased by 8%.
2. Fertilizers improve food quantity and quality
3. Fertilizers protects from pest attacks
• Pakistan’s soil is deficient from basic nutrition and hence requires fertilizer.

3.2 Types of Fertilizers

• Organic nutrients: Carbon, hydrogen, oxygen
• Primary nutrients: Nitrogen, phosphoric, potassium
• Secondary nutrients: manganese, sulfur, calcium
• Micronutrients: zinc, copper, baron.
• Nitrogenous
1. 72% of the industry, out of which 63% is occupied by urea.
2. Ammonium sulfate and Calcium ammonium nitrate
3. Nitrogenous fertilizers are overused in Pakistan which causes
environmental degradation, increases the acidity of soil, and seepage into
river and ground water spreads poison.
• Phosphoric
1. 27% of the industry o DAP occupies 22% of the 27%
2. It helps in root development and photosynthesis.
• Potassium
1. 1% of the industry as Pakistan’s soil is not potassium deficient.
2. Helps in preventing pest attacks, growth of root, fruit formation.

3.3 Factor Conditions

• 60% of the cost of manufacturing fertilizers is taken by raw materials.
• Raw material in producing nitrogenous fertilizer
1. Natural gas is required to produce ammonia
 2. Natural gas composes of fuel and feed stock.
3. Feed stock is subsidized 60% by the government and is not suitable for
home consumption.
4. Mari gas field has been fixed for fertilizer production as it has mainly feed
stock gas.
5. Fertilizer plants are located near these gas fields.
6. Nitrogen fertilizer is available cheaply due to heavy subsidies, hence
majority of the poor farmers use it in their farms even when there is no
need
• Raw material for phosphoric fertilizers
1. Phosphoric acid and rock are most important raw materials
2. They are imported from Egypt, Morocco, etc.
3. Fauji fertilizer bin qasim limited (FFBM) is the only producer of DAP, and
100% of their raw materials comes from imports.
• Water o If fertilizer is used without required amount of water, it may damage
the soil.
1. Irrigated land requires more fertilizer
2. 30% capacity of canals has been decreased due to excessive silting.
• Machinery is imported from US, Japan, Italy, Denmark.
• Warehousing and supply chain is important
1. The entire country wants fertilizer in a 15-day period
2. Dealership is crucial as it is the dealers who can market fertilizers to
farmers.
3. 18% transportation through railway
• Cheapest labor
1. 74% is technical staff.
2. Employees are sent abroad for training.
3. Engro training program for 3 years
• Per hectare usage of fertilizer is higher in Pakistan than India, but the yield is
higher there.

3.4 Demand Conditions

• There are two seasons in which they are demanded heavily
1. Kharif season in Mar-Apr
2. Demand for urea increases during this season.
• Rabi season in Sept-Oct
1. A lot of fertilizer is used as crops with heavy requirement of nutrients are
sown.
2. 45% of the area under cultivation is wheat which requires a lot of fertilizer.
3. Sugarcane also requires high amounts of fertilizers.
• Demand drivers
1. The higher the income of farmer, the more fertilizers he will use as he will
associate good yield with a good fertilizer.
2. Less rain means more demand.
3. Subsidy lowers the price of buying fertilizers.
4. Dealership influence in convincing the farmers.

3.5 Structure
• 9 companies, 3 of them are publicly owned
• 90-95% market is controlled by private companies
• Oligopolistic structure
1. FFC- 50%
2. Engro- 21.4%
3. FFBM- 13%
4 Sugar Industry

4.1 History of the Sugar Industry

• At the time of partition, we had 7 sugar mills. 5 were in east Pakistan, 2 in
west.
1. Rahwali Sugar Mill had capacity of 600 tons crushed per day (TCD)
2. Takht Bhai Sugar Mill had the capacity of 1200 tons crushed per day (TCD)
• Pakistan was initially only growing sugar cane for India
1. Pakistan was a net importer.
• 1947 – 1970 o After partition, Premier Sugar Mill was set up in 1950 in West
Pakistan.
1. It was the largest sugar mill in Asia then.
2. Capacity was 11250 TCD.
• 1970 – 1980
1. 35 new sugar mills were developed.
2. This was called the golden era for sugar industry.
3. A conscious effort to develop sugar industry ensued.
• 1980 – 1996
1. In the Zia era and later, 10 more mills were developed
• Currently, there are around 90 sugar mills in the country

4.2 Importance of Sugar Mills

• Sugar Mill is important for the development of rural areas.

• The area around a sugar mill is like an oasis in the desert
• We get electricity, water, and good infrastructure to facilitate the mills.
• Sugar is also a basic raw material for the glue industry

 Source of Sugar in Pakistan

1. Sugarcane: 70 percent of the sugar is made from sugar cane
2. Sugar beet: 30 percent is from sugar beet.
3. Tropical condition in Pakistan makes it ideal for sugar cane.

 Components of Sugarcane
 Sugarcane is a product that has zero waste.
 It has three by-products and all of them are used for different processes.
 Pakistan can easily create value, but it doesn’t.
 This results in expensive sugar.

Bagasse
• Bagasse is used for energy generation
1. Sugar mills can generate their own electricity
2. They can provide enough to the national grid as well.
3. They have the potential to be self-sustaining
• Used in paper and wood as well
1. Medium Density Fibreboard (MDF) uses bagasse
2. It is the raw material in most new furniture these days.
Molasses
• This is a thick dark liquid that is very nutritious
• Molasses is used as the main product in many developed countries instead of
sugar.
1. It is argued that molasses is the most important product produced from
sugarcane
2. Brazil treats molasses as the main product and sugar as the by product
• It produces ethanol, which is a biofuel.
1. Kinder to the automobile and environment.
2. Less harsh for the environment.
3. To convert ethanol to a biofuel, we need distilleries which is mainly for
alcohol.
4. Also produces industrial alcohol for medicines and stuff
5. Can’t have distilleries in Pakistan (Islamic fatwa)
• Pakistan waste molasses
1. It is used in animal feed
2. Molasses is also directly exported without any value addition.

Press Mud
• It is what remains when cane is passed through the crusher
• Press mud is the most efficient form of organic fertilizer. It is sold back to the
farmers

4.3 Benefits of the Sugar Industry

• Sugar industry is the second largest after textile in large-scale Engro based
manufacturing
1. Everything is domestically available
2. It is one of the 13 major crops. It is a cash crop.
• RM production is high in Pakistan.
1. We are 4th or 5th largest in terms of sugar production area under
cultivation.
2. However, we are 60th or 70th in terms of yield.
3. Not an efficient industry
• Important source of revenue generation for the government
1. 11 different taxes levied on sugar.
• Employment Opportunities
2. It absorbs semi-skilled or unskilled labour, so it is of great importance.
3. Pakistan has a large uneducated and unemployed population.
4. Employs most marginalised people.
• High consumption
1. Pakistan is the 8th largest in terms of sugar consumption.
2. Developed economies have higher consumption but Pakistan is amongst
the lists
3. Pakistan produces a lot of sweets and biscuits.
4. Per capita need for sugar is 25%

4.4 Sugarcane Harvesting Issues

• Sugarcane is a year-long product. It takes a complete year for it to be ready.
• Sugar beet on the other hand takes 4-5 months
• Farmers only get 15 days to prepare the land for the next cultivation of
sugarcane
1. Supreme Court sets an official date for mill owners to start crushing.
• Sugarcane spoils quickly after it’s cut
1. Loses weight by 2% daily.
2. Loses sucrose content by 0.2% daily

4.5 Issues in the Sugar Industry

• Low yield
1. Sugarcane is left to dry for days in Pakistan causing it to lose value
2. It loses 2% weight each day.
3. It also loses 0.2% sucrose every day so that results in lower yield.
4. Mill owners have no interest in buying sugar cane quickly.
5. Yield per hectare is one of the lowest in the world
• Wrong incentives set for farmers
1. Since farmers get paid in weight, they produce heavy, but less sucrose
content crops for payments.
2. Results in lower yield
• Sugar beet is the better option
1. Sugarcane has 5% to 6% recoverable.
2. Sugar beet has 13% recoverable.
3. Sugarcane depletes the strength and resources of the soil. Cannot plant
over there again.
4. Sugar beet can be planted at the same space again.
• Improper ratooning o Ratoon crop is the portion of sugarcane left underground
1. New plants grow from these roots and next crop is less costly for farmers.
2. Farmers treat it as free crop, lowering the yield.
3. Experts believe that farmers need to take proper care of these crops.
• Delayed crushing
1. Supreme court decides and announces support prices in advance.
2. The mill owners say nothing then.
3. Needs to be crushed within six hours of cutting
4. Best time to crush is Oct 15 for sugar production.
5. Mill owners delay crushing to ensure they buy cheaper sugar.
6. When the crop is cut, that’s when the debate begins
• Exploitation of farmers
1. Farmers are vulnerable as soon as they cut the sugar cane crops.
2. The support prices by the government are of no help once crops lose value
• Lower Cotton Crop Yield
1. Political leaders force the areas to produce sugarcane in areas where
cotton is supposed to grow.
2. This reduces the yield of cotton.
3. Cotton is a main crop that is exported
• Water shortage and inappropriate fertiliser usage
1. 1525 mm of rainwater is required for sugar cane otherwise irrigation is
required.
2. Good drainage system and good system of irrigation required
3. Sugar cane is a strenuous product
4. Pakistan has water shortage, so this isn’t an ideal crop
5. Not using the right fertiliser lowers yield too.
6. Untimely payments to farmers result in them not buying good fertilisers
• Expensive sugar o Inefficient systems raise the cost of production
1. We pay twice the price for sugar that the world pays
2. Our tax money is also used to subsidise these mills for exports
• Demand Miscalculation o More sugar is exported at subsidised rates
1. To meet the shortfall, sugar is imported.
 2. This is then sold at expensive rates
3. Mill owners make the most money.
4. Requirement is of 5.5 m tonnes. We produce around 6.8 m tonnes

4.6 Structure of the Sugar Industry

• More than 50% of sugar industries are owned by politicians.

1. It is a very political industry
• To open a sugar mill, we need an NOC.
2. Zulfiqar Mirza obtained NOC and opened his first sugar mill
3. He had zero funds and asked the banks for loans
4. Easy way to be a billionaire
• Subsidies given to sugar producers to export
• Banks also give loans with no questions asked.
• Sugar mill setting up would mean more sugarcane production.
1. This would result in less production of cotton. Punjab and Sindh Sugar Mills
• Main dispute between these two mills. Both are powerful owners
• However, the lower Indus delta region is the best for sugar production.
2. Karachi has a temperate climate, so the sugar cane crop matures in 12
months
3. Higher recoverable in Karachi crop
4. In Punjab, it’s 8 months so the Sugar is not as good as Sindh.
5. Lower recoverable in Punjab crop
• When crops mature quick, the recoverable is less.
• Punjab mills debate that the quality of Sindh Sugar is better, so the mills have
a greater yield.
• The government has then introduced quality premiums.
1. If the sucrose content is greater than 8.9%, the mill owners must pay a
premium to the farmers.
2. This ensures both mills are in the same position.
3. Farmers with better crops have an edge then.
• In the recent past, Punjab has surpassed Sindh in terms of yield and production
by making the whole process efficient.

4.7 Factor Conditions

• Sugar is made from sugar cane and sugar beet.
1. Sugar beet is from the beetroot family.
2. Slightly larger than beetroot and it's only grown for sugar production.
• Many strategists think that Pakistan should produce sugar from sugar beet
• Sugar beet takes 5-6 months whereas sugar cane takes a year.
• Water requirement is high for sugar cane.
• In Punjab, sugar cane and cotton compete. Sugar cane takes twice as much
water than cotton. High opportunity cost.
• Yield of sugar beet is higher. Recoverable is higher too. Recoverable is the
percentage that can be converted to sugar.
• Sugar beet sugar is slightly less sweet. Cannot identify which one is which.
• Sugar cane is a political crop now. Sugar beet is a perishable item. Might need
cold storage systems • Sugar cane doesn't rot easily. It dries up but doesn’t rot.
• Brazil monitors the age of sugar cane through computer systems
• Within 6 hrs of crushing, it must be harvested

Related and supporting industries.

• If mills and farmers collaborate, productivity would increase.
• Zoning improved productivity as the mill owners and farmers worked
collectively.
• Banks also provided easy credit to farmers.
• Role of government.
1. Indirect subsidies.
2. Canal network is made and maintained by the government.
3. Sugar production uses water provided by these canals.
4. Sugar production is subsidized one way or the other.
• Fertiliser is also subsidized because it is produced with natural gas.
1. Govt gives substantial subsidies to fertilizing firms to ensure Pakistani
farmers get cheap fertilizer.
2. Sugar cane uses fertiliser so cheap fertiliser and water indirectly
contribute to subsidies.
3. Government has no choice but to subsidize the depleting.

4.8 Recommendation

• Factor related to recommendations.

1. Sugar beet (less intensive for land)
2. Is it a possibility, is it doable?
3. Only grown in non-tropical areas for Sugar only
• Demand related recommendations
1. 17% sales tax increases prices
• Recommendations from the perspective of the government
2. Open the market
3. Imports
• Strategists believe Pakistan should grow sugar beet instead of cane.
1. Sugar beet takes 5-6 months whereas cane takes a year
2. Cane takes a lot of water
3. Water shortage in Pakistan

5 Pakistan’s Economy (General)

5.1 Current, Fiscal, Savings Account (According to the TA)

 Current Account
 When the value of imports exceeds the value of exports
 Balance of payment deficit contributes to this
 Pakistan had a dangerous position in 2018. O
1. We were at the brink of an economic breakdown and bankruptcy.
2. We took loans to pay interests (not capital) to avoid bankruptcy
 Imran Khan worked on an import compression policy, not by choice.
1. He stopped imports to improve the balance of payments
2. Increasing exports is a supply side measure which is expensive, time
consuming.
3. Foreign reserves were dangerously low
 Imported items became expensive, discouraging others to buy them
(devaluation)
 Major part of our deficit is funded by borrowing.
 Remittances have been high in the last couple of years
1. Devaluation has resulted in extra amount in rupees.
 2. People who lost their jobs globally brought all their savings
 Pakistan had an increasing deficit in the year 2021
1. Value added goods not being produced
2. High inflation caused devaluation of currency
3. Rapid devaluation led to an increased volume of exports
 Some Solutions
1. Supply side and export enhancement policies
2. Research and development
3. Education and training

 Fiscal Deficit
• Shortfall in government revenue compared to its expenditures.
• Government revenue is made up of tax
1. Income tax
2. Custom duties
3. Toll bills
4. Import duties
5. Profit making public enterprises

• Tax collection is not efficient in Pakistan (flawed)

a. A lot of hype was generated in 2018 for tax collection but the
collection was underwhelming o Public started registering
themselves as filers
2. Collection was still low because of lower import duties
3. Not many pay income tax in Pakistan.
4. When aggressive import policy was pursued to correct current
account deficit, tax collection was lower. Hence, a higher fiscal
deficit.
• Fiscal deficit isn't bad. It includes development and non-development
expenditure
• Development expenditure
1. Generates economic activity in the future
2. Spending on education, training, health sector, and industries.
3. Deficit due to development expenditure is beneficial later
4. 12% of the GDP expenditure approximately
• Non-development expenditure
1. Doesn’t contribute to economic activity.
2. Defence, pensions, army benefits, debt interest are all non-
development expenditures. These are transfers
3. 88% of the GDP expenditure approximately
• Direct Taxation
1. Paid directly to the government
2. Income tax, sales tax, corporation tax
3. Progressive
• Indirect Taxation
1. Paid indirectly to the government
2. VAT
3. Regressive

Low Saving Rate

• Percentage of disposable income that people save.
• Pakistan has one of the lowest rates of savings
1. People don’t trust banks, low financial literacy
 2. The lower socioeconomic class thinks investment through banks is haram.
3. When there’s low savings, there is less money for investment.
4. This results in lesser funds to generate economic activity.

• Huge unbanked economy

1. Most people don’t have bank accounts
2. The notion that ‘interest is haram’, people save money at home
3. People also save a lot in committees. It goes unbanked
• Pakistan doesn’t have a huge working population
1. Most of our population is dependent.
2. Female labour force is low in Pakistan too
3. Bangladesh on the other hand has good population control and a large
female labour force.
• Very high MPC, low MPS
1. This is due to low levels of income.
2. Unbanked and undocumented population
3. People save money by keeping cash/gold at home.
4. Pakistan saves the least amount of money in the world.
• Gini coefficient is very high, higher income inequality.
1. The gap between the rich and poor is big.
2. The people of lower socioeconomic class don’t earn enough to save.
3. The rich don’t invest in Pakistan due to inflation and lower returns.
They invest abroad and consume in Pakistan for fame and power.
4. Saving abroad has no benefit for the country.
5.2 Overall Discussion on the economic condition/stability of
Pakistan(just an overview)