62 years of Pakistan’s economy

[Naveed Yaseen]

Real potential yet to be exploited

Friday, August 14, 2009
By Mansoor Ahmad

LAHORE: Pakistan has come a long way from an almost zero industrial base in 1947 to a credible manufacturing centre more on the strength of its huge economic potential than government’s policies that continue to favour the rich.

Pakistan inherited 20 per cent of the subcontinent’s population at the time of partition on August 14, 1947. However, her share in the industry was less than 7 per cent, mostly consisting of small-scale industrial units.

No credible large industry existed at the time of its birth. Pakistan, which included East Pakistan (now Bangladesh) as well, had only 34 factories, employing around 26,400 people out of a population of 80 million.

In 1947, the country had not a single ordnance factory and no major installations. The East wing produced 70 per cent of the world’s jute, but there was not a single jute mill and West Bengal (India) was the sole buyer. In the West wing, only 16,000 out of the total 1,500,000 cotton bales produced could be processed domestically. The new state had not even its own bank and depended on the Reserve Bank of India.

Industrialising the country was a challenge that the founding economic managers having very little economic knowledge undertook with sincerity. The country achieved high growth rates in manufacturing from 1950-55 after starting from an exceptionally low industrial base. Credit must be given to the planners of that time for facilitating industrial growth with scarce resources.

Experts point out that feudal culture remained dominant which did now allow the growth of a strong middle class which is the hallmark of all successful East Asian economies. Inequalities in income and opportunities still exist and this is the reason that though Pakistan’s authoritarian institutions had many features similar to contemporary East Asian states, in particular South Korea, its long-run performance was poor than those states.

The agriculture sector suffered in the initial 10 years due to official neglect in resource allocation. Heavy tariff protection and tax benefits accelerated industrialisation. Average agriculture growth during 1950-58 was 1.4 per cent. Industrial growth in the same period was 19.1 per cent. Miserly allocation for education and health set the trend of neglecting social sectors that still continues.

The country has since then come a long way. It has a credible ordnance factory, vibrant steel, plastic and auto industries. It is producing tractors, cars and motorcycles. It has a world-class textile industry and is producing fertilisers, chemicals, sugar and cement. Still the economy is in turmoil.

We have been exploited by corrupt politicians, dictators and bureaucrats who have parked assets worth around $150 billion, which is equivalent to the total size of the economy, outside the country.

We have an undocumented economy larger than the size of our documented economy. Currently, the economy is in turmoil and despair is largely seen in the eyes of the general public as well as genuine entrepreneurs.

Let us just look at the potential of the country. Pakistan is the ninth largest producer of wheat in the world, fourth largest producer of milk, 12th largest producer of rice and among top six exporters of the commodity. It is the fourth largest cotton producer and third largest cotton consumer. It has the largest integrated canal irrigation system around the globe, has the largest rock salt deposits and the fourth largest coal reserves. It is one of the most efficient producers of cement in the world.

http://www.thenews.com.pk/daily_detail.asp?id=192944