INTRODUCTION TO PAKISTAN’S INDUSTRIAL SECTOR

🔹 1. Overview of the Industrial Sector in Pakistan

●​ Industrial sector = 19% of GDP (2023):​
This means nearly one-fifth of all goods and services produced in Pakistan come
from the industrial sector. It’s a huge contributor to the economy after agriculture and
services.​

●​ Key role in job creation:​

Industries like textile, food processing, construction, and automobile manufacturing
employ millions of workers, especially unskilled and semi-skilled labor.​

●​ Vital for foreign exchange earnings:​

Industrial exports, especially textiles and pharmaceuticals, bring in valuable foreign
currency that Pakistan needs to pay for imports like oil and machinery.​

●​ Drives overall economic development:​

Industrial growth helps in building cities, creating infrastructure (roads, buildings,
power plants), and developing supporting sectors like banking and logistics.​

🔹 2. Composition of the Industrial Sector

●​ Manufacturing:​
This is the largest part of the industrial sector and includes making finished goods
from raw materials — like textiles from cotton or cement from limestone. It includes
both large factories and small workshops.​

●​ Mining and Quarrying:​

Involves digging out natural resources like coal, natural gas, and salt. These are raw
inputs used for energy generation and production in other industries.​

●​ Construction:​
Covers building houses, roads, bridges, and factories. This sector not only boosts
GDP but also absorbs a lot of labor, especially in urban and semi-urban areas.​

●​ Utilities:​
This includes providing electricity, natural gas, and water — essential for both
households and industries. Issues in this sub-sector directly affect the performance of
the whole economy.​
🔹 3. Major Industries in Pakistan
●​ Textile Industry:​
This is Pakistan’s biggest and most important industry. It produces cotton yarn, cloth,
and garments. It contributes more than 60% to Pakistan’s exports and supports the
livelihood of millions.​

●​ Cement Industry:​
Key for domestic infrastructure (roads, buildings) and also exports to countries like
Afghanistan. It benefits from local availability of raw materials like limestone and
gypsum.​

●​ Food Processing Industry:​

Converts perishable agricultural items (fruits, grains, milk, etc.) into packaged food
products. It reduces wastage, adds value, and has huge export potential, especially
in halal foods.​

●​ Pharmaceutical Industry:​
Produces medicines for local use and exports. It helps reduce dependence on
imported drugs and improves public health resilience.​

●​ Automobile Industry:​
Assembles cars, motorcycles, trucks, and buses. It supports steel, rubber, glass, and
parts industries, and is vital for transportation and job creation.​

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🔹 4. Mining, Construction, and Utilities

🪨 Mining and Quarrying
●​ Contribution to industrial output:​
This sub-sector plays a foundational role by supplying raw materials like coal, salt,
and natural gas. These are essential inputs for power generation and manufacturing
industries.​
 ●​ Major minerals include:​

○​ Coal: Used in thermal power generation and cement production.​

○​ Natural gas: Vital for household energy, fertilizer production, and powering
industrial units.​

○​ Salt: Pakistan is home to the famous Khewra Salt Mine — one of the world’s
largest — used domestically and for export.​

🏗️ Construction Sector
●​ Key contributor to GDP and jobs:​
Construction activities — like building highways, dams, housing societies, and office
towers — not only boost economic growth but also generate large-scale employment,
especially for low-skilled workers.​

●​ Driven by infrastructure projects:​

Large government and CPEC (China-Pakistan Economic Corridor) projects are
pushing this sector forward by creating demand for cement, steel, and labor.​

●​ Challenges:​

○​ Financing difficulties: Many projects stall due to lack of capital or delays in

payment.​

○​ Regulatory hurdles: Complicated procedures for approvals and land

acquisition often slow things down.​

🔌 Utilities (Electricity, Gas, Water Supply)

●​ Supportive role in industrial functioning:​
This sub-sector provides basic services needed for both industrial and domestic life.
Without reliable power, factories can't run — making this sector a backbone of
productivity.​

●​ Current challenges:​

○​ Outdated infrastructure: Many areas still suffer from frequent electricity

breakdowns and poor gas distribution.​
 ○​ Distribution inefficiencies: Even where production is sufficient, faulty
transmission lines and theft lead to energy losses, affecting industrial
performance.​

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🔹 5. Challenges Facing Pakistan’s Industrial Sector

⚡ Energy Shortage
●​ One of the biggest obstacles to industrial growth.​

●​ Frequent power outages (load shedding) and gas supply disruptions increase
production costs and reduce factory output.​

●​ Many industries are forced to rely on expensive alternatives like diesel generators,
making them less competitive globally.​

🛣️ Infrastructure Bottlenecks
●​ Poor transportation and logistics networks delay raw material delivery and finished
goods distribution.​

●​ Underdeveloped industrial zones, bad road conditions, and lack of modern freight
systems add to the cost of doing business.​

●​ Weak infrastructure limits investment and slows down exports.​

🖥️ Lack of Technological Advancement

●​ Many industries still use outdated machinery and traditional production techniques.​

●​ Without modern technology, productivity stays low, and products fail to meet
international quality standards.​
 ●​ Pakistan lags behind countries like Vietnam, Bangladesh, and India in automation
and innovation.​

💸 High Cost of Doing Business

●​ Multiple issues make running a business expensive:​

○​ Complex tax systems​

○​ Bureaucratic red tape​

○​ Bribes and corruption​

●​ These discourage both local entrepreneurs and foreign investors.​

📜 Regulatory Hurdles
●​ Excessive and overlapping regulations increase time and cost of setting up and
running a business.​

●​ For example, getting a construction permit or utility connection can take months.​

●​ This discourages new businesses and slows expansion of existing ones.​

👷 Skills Gap
●​ There is a shortage of technically trained and skilled labor in areas like electronics,
engineering, robotics, and management.​

●​ Many workers lack practical experience and up-to-date knowledge due to

poor-quality vocational training.​

●​ This limits productivity and makes it hard for industries to upgrade to modern
systems.​

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🔹 6. Government Initiatives to Promote Industrial
Growth

🏭 Development of Special Economic Zones (SEZs)

●​ SEZs are designated areas where investors get special incentives:​

○​ Tax breaks​

○​ Duty-free import of machinery​

○​ Ready infrastructure (roads, electricity, water)​

●​ Purpose: attract both local and foreign investment, especially under CPEC.​

☀️ Focus on Renewable Energy

●​ To tackle energy shortages, the government is promoting solar, wind, and
hydropower projects.​

●​ Helps reduce reliance on expensive fossil fuels and improves energy reliability for
industries.​

🚧 Upgrading Infrastructure
●​ Government is investing in:​

○​ Industrial parks​

○​ Logistics corridors​

○​ Road and railway networks​

●​ Aim: reduce transport delays and connect factories to ports and markets faster.​
🖥️ Promoting Technology Adoption
●​ Government supports tech upgrades through:​

○​ Subsidies on modern machinery​

○​ Training programs for industrial workers​

○​ Incubators for tech-based startups​

●​ Goal: improve efficiency and encourage innovation.​

🔹 7. Opportunities for Growth in the Industrial Sector

📈 Growing Domestic Market Demand
●​ Pakistan has a large population (240+ million) with rising income levels, creating
demand for food, clothing, electronics, etc.​

●​ This rising demand encourages local production and investment.​

🌍 Export Potential
●​ Pakistan has preferential trade access to key markets (e.g., EU’s GSP+).​

●​ Neighboring countries like China, Afghanistan, and Central Asian states offer strong
export markets for Pakistani goods.​

🧠 Technology Adoption and Innovation

●​ Growing access to automation, artificial intelligence, and digital tools opens doors for:​

○​ Quality improvement​

○​ Cost reduction​
 ○​ New product development​

💼 Investment Opportunities
●​ Industries like renewable energy, automobiles, IT, and pharmaceuticals are
attracting investors.​

●​ Reforms and SEZs are improving the investment climate.​

🔹 8. Historical Perspective on Pakistan’s Industrial

Development

🕰️ Pre-Partition Era
●​ Cities like Karachi and Lahore were already industrial hubs under British rule.​

●​ Pakistan inherited textile, leather, and jute industries.​

●​ Partition disrupted supply chains, causing early setbacks.​

🇵🇰 Early Years After Independence

●​ Pakistan had to rebuild its industrial base from scratch.​

●​ Government promoted import substitution, encouraging local production to replace

imports.​

●​ Tariff protections and industrial licensing were common.​

⚙️ Industrialization Drive (1960s–1970s)

●​ Under President Ayub Khan and PM Bhutto, Pakistan built:​
 ○​ Pakistan Steel Mills​

○​ Heavy Mechanical Complex​

○​ Fertilizer plants​

●​ The Green Revolution also boosted agriculture, helping agro-based industries.​

📉 Shifts in Policy (1980s–1990s)

●​ Government shifted to liberalization and privatization.​

●​ Structural Adjustment Programs (SAPs) by the IMF/World Bank were introduced.​

●​ Goals: open up markets, reduce subsidies, and promote private sector.​

🏭 Contemporary Industrial Landscape

●​ A mix of old and new industries:​

○​ Traditional: textiles, sugar, cement​

○​ Modern: pharmaceuticals, IT, automobile assembly​

●​ Focus is shifting toward value-added exports and tech adoption.​

⚖️ Current Challenges vs. Future Potential

●​ Challenges: energy crisis, inconsistent policies, weak infrastructure.​

●​ Opportunities: young workforce, large market, strategic location, abundant resources.​

🔹 9. National Industrial Policy 2023

🎯 Vision and Target
●​ The policy aims to boost exports to $100 billion in the next 5 years.​

●​ Focus: export-led industrialization, not just domestic production.​

●​ Emphasizes global competitiveness, innovation, and efficiency.​

⚠️ Current Problems Identified

●​ Pakistan is not keeping pace with fast-growing neighbors like India and China.​

●​ Imports were $55.3 billion, double the exports in FY 2022-23.​

●​ Most imports aren’t used in export production → sign of structural imbalance.​

🔹 10. Structural Issues and Distortions in Industrial

Sector

1️⃣ Anti-Export Bias

●​ High tariffs protect domestic industries, so they prefer selling locally instead of
exporting.​

●​ E.g., if a product sells for $100 globally, a 20% import tariff makes it sell for $120
locally.​

●​ Result: exporters earn more selling locally than in international markets → exports
suffer.​

2️⃣ Import Substitution Dependence

●​ Local industries rely on protected domestic markets.​

 ●​ They often import raw materials, so even "import substitution" industries still cause
a foreign exchange burden.​

3️⃣ Market-Seeking FDI

●​ Most foreign investment comes to sell products locally, not to make exports.​

●​ Multinational firms import inputs, assemble locally, and repatriate profits → limited
benefit for Pakistan.​

4️⃣ Policy Capture

●​ Powerful industrialists influence policy for personal gain.​

●​ They seek:​

○​ Tax breaks​

○​ Subsidies​

○​ Protection from competition​

●​ Once support ends, these industries collapse → they never become globally
competitive.​

🔹 11. Future Industrial Strategy: Radical Reforms

Needed

●​ Pakistan needs deep reforms in:​

○​ Industrial structure​

○​ Business environment​

○​ Innovation policies​
 ●​ Transition plan:​

○​ Short-term: focus on export-led growth​

○​ Long-term: build an innovation-driven economy​

●​ Reform goals:​

○​ Self-sustaining industries​

○​ Less reliance on state protection​

○​ Reward efficiency, not political connections​

🔹 12. Industrial Development in Punjab

🧵 Textile and Garments Sector Focus
●​ Punjab’s government identifies textiles as a high-potential sector.​

●​ Garment industry has major opportunities due to:​

○​ Labor-intensive nature​

○​ Global demand​

○​ Employment potential​

🔍 Challenges in Punjab’s Garment Sector

●​ Most producers make low-value, bulk goods​

●​ Lack of innovation, branding, and design​

●​ Weak global presence due to poor marketing and compliance​

🛠️ Recommended Reforms (by International Growth Center)
●​ Improve:​

○​ Market access​

○​ Trade policy​

○​ Customs efficiency​

○​ Skilled labor​

○​ Energy supply​

○​ Cluster development (geographically connected industries)​

🔹 13. Opportunities under CPEC (China-Pakistan

Economic Corridor)

🌐 CPEC’s Industrial Potential

●​ China is reducing garment exports due to high labor costs.​

●​ Pakistan can fill that gap by attracting Chinese orders and investment.​

🔄 Need for Strategy

●​ Pakistan must have a clear and stable industrial plan to fully benefit from CPEC.​

●​ Without consistent policies, investment and collaboration may stall.​

🤝 Cooperation Strategy (Punjab Government)

●​ With support from global experts, Punjab is working to:​
○​ Align infrastructure with economic clusters​

○​ Make doing business easier​

○​ Attract Chinese industrial investors​

○​ Renegotiate Free Trade Agreements with China to favor local industries​