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INDUSTRY in PAKISTAN
Industry:
Pakistan ranks forty-first in the world and fifty-fifth worldwide in factory
output.
Pakistan's industrial sector accounts for about 24% of GDP. Cotton textile production and
apparel manufacturing are Pakistan's largest industries, accounting for about 66% of the
merchandise exports and almost 40% of the employed labour force. Other major
industries include cement, fertilizer, edible oil, sugar, steel, tobacco, chemicals,
machinery, and food processing.
The government is privatizing large-scale parastatal units, and the public sector accounts
for a shrinking proportion of industrial output, while growth in overall industrial output
(including the private sector) has accelerated. Government policies aim to diversify the
country's industrial base and bolster export industries.

Definition:
An industry or sector (from Latin industrius, "diligent, industrious")
is the manufacturing of a good or service within a category. Although industry is a broad
term for economic activity and trade, in economics and urban planning industry is a
synonym for the secondary sector, which is a type of economic activity involved in the
manufacturing of raw materials into goods and products.
Types of industries:
There are four types of industries
a. Small scale industries
b. Medium scale industries
c. Large scale industries
d. Defense industry

Small Scale industries:

Small-scale industries are those industries in which 2 to 9
people work together to make some product. It is is usually less capital intensive and is
more consumer-oriented than business-oriented
Small Scale Industries are providing large-scale employment next to Agriculture
in Pakistan. It have played a vital role in the economy by providing large scale
employment opportunities at relatively low capital cost, a wide entrepreneurial base, easy
dispersal of industries in rural areas and concentration of certain industrial groups at
specific areas.
Examples of small-scale industries are
i. Handicrafts industries
ii. Shampoos (Herbal)
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iii. Pickle manufacturing

Medium scale industries:

Medium scale industries are those industries in which
numbers of workers are up to 100. Medium scale industries are producing number of
quality products.
Through medium scale industries many people get employment so unemployment
decrease and economy moves in a positive direction. And people get quality products at
relatively suitable prices.
Examples of medium scale industries are:
i. Fan industries
ii. Gas cylinder industries
iii. Auto pins industries

Large-scale industries:
Large-scale industries are also known as heavy industries

Heavy industry does not have a single fixed meaning as compared to small scale
industries It can mean production of products which are either heavy in weight or in the
processes leading to their production. heavy industry projects can be generalized as more
capital intensive or as requiring greater or more advanced resources, facilities or
management.
Heavy industry is often defined by governments and planners in terms of its impacts on
the environment. These definitions concentrate on the seriousness of any capital
investment required to begin production or of the ecological effect of its associated
resource gathering practices and by-products. In these senses, the semiconductor industry
is regarded as "heavier" than the consumer electronics industry even though microchips
are much more expensive by weight than the products they control.
Heavy industry is also sometimes a special designation in local zoning laws.because for it
special and wide places are required.
Examples of large scale industries are:
i. Textile industries
ii. Chemical industries
iii. Electronics industry

Defense industry:
It plays an important role in the safety of any country. In this type of
industry all the weapons are formed which are necessary for the defense of a country.
Examples of defense industries are:
Pakistan ordinance factory 501
Pakistan ordinance factory 502
Kahota research laboratories

IMPORTANCE OF INDUSTRIES
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The mot important feature of a modern developed country is its strong

industrial base. Industrial development plays a very important role in economic
development. Industrialization is the key for economic development. If a country
lags behind in industry, it cannot hope to make progress in other fields such as
agriculture, transport, energy or education. It is the manufacturing sector, which
can provide employment opportunities to rising population.
Following are the main advantages of industrial development.
Economic development
Increase in national income
Increase in employment
Increase in investment
Development of agricultural sector
Utilization of natural resources
High living standard
Economic stability
Specialization
Increase in foreign exchange reserves
Economic development
Industrial development is the key of economic development. Industrial
development improves the other sectors such as transport, construction, and
agriculture etc.
Increase in national income
In order to increase national income, the industrial development is
essential. Industrialization makes possible the optimum utilization of scarce
resources.
Increase in employment
Unemployment is the common feature in pakistan. The industrial growth
increases job opportunities and in this way unemployment is removed.
Increase in investment
Industrialization increases the incomes of the people. Due to increase in
income, their savings and investments also increase.

Development of agriculture
The deveopment of industry is nessasary to develop the agricultural secter
because with the development of industry, modern agricultural implements
and furtilizers can be produced.
Utilization of natural resources
Through industrial development, the unutilized resources can be utilized.
Such as coal, oil, and gas resources are available in our country but due to
lack of industrializaton we can not use them.
High living standard
Through industrialization, the incomes of people are also increased. The
rise in incomes raises the living standard of people.
Economic stability
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Industrialization plays very important role for economic stability of a

country. Through industrialization, exports of goods provides a better
chance of economic stability and prosperity.
Specialization
Industries require specialized labour for operation of plants and
machinary. So industrialization promotes specializatin of labour. In this
way the overall output of the workers increase.
10. Increase in foreign exchange raserves
Through industries, foreign
exchange earnings are increase due to increased in exports and decrease in imports

SOURCES OF INDUSTRIAL FINANCING

There are two sources of financing
Internal financing
External financing
INTERNAL SOURCES
IDBP
The Industrial Development Bank of Pakistan (IDBP) was established in
August 1961. it is one of the oldest and leading financial institution of
Pakistan. The Bank infact replaced the Pakistan Industrial Finance
Corporation created in 1949.
The bank provides finance to the new industrial conceren and modernization
of the existing units. It provides the loan both in local and foreign
currencies for setting up the new industrial units. So main objective of this
bank is the industrial development. It issued the loan on the behalf of the
government. It also encourages the establishment of industries in the less
developed areas. It pays the due regard to the export oriented industries
and to thoe which are based on dmestic raw material.
The bank also provides the advisory services to clients in updating their
production process.
PICIC
Pakistan Industrial Credit and Invstment Corpoation (PICIC) was
established in 1957 as a public limited company. It was established for the
purpose of raising fixed capital for large scale industrial projects.
Functions :
PICIC provides medium and long term loans to the industrial sectors in the
following ways:
It helps in expansion of industral units.
It extends loans for the establishment of new industries.
It encourages and cooperates with the foreign investors to set up joinprojects in
Pakistan.
It invested directly by purchasing the share capital of join stock companies.
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It creates and expands investment shares and security markets.

It has started general banking functions
It provides manageial, technical and administrativ services.
3. ICP
Investment Corporation of Pakistan (ICP) was established in February,
1996.
Its main objectives are:
To improve the growth of small and medum size business.
To encourage and develop the capital markt in the country.
To advance loans for investment purpose.
To protect the rights and interest of the shareholders.
ICP opens and maintains the investment accounts.
ICP keeps the values of shares stable by buying and selling shares.
ICP started the sharing account schemes for investors on PLS basis.
ICP collects the savings of people.
4. NDFC
National Development Finance Corporation (NDFC) was established in 1973.
its main objects are
To provide the finance to the industries in public sector.
To encourage the establishment of new industries.
To assist in modernization and expantion of existing of existing enterprises in public
sector.
To provide the finance to private sector under certain condition.
To provide the technical assistance.
To offer higher rate schemes in the country with maximum safety and security.
5. SBFC
Small Business Finance Corporation (SBFC) was established in 1972. its
objects are:
To provide financial aid to small businessmen.
To increase the rate of production and employment in the country.
To provide the finance to those people who have technical how but are financially
poor.
To provide the finance to cottage and small scale industries.
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EXTERNAL SOURCES
6. SAARC
South Asian Association for Regional Cooperation (SAARC) was set up in
1981. It includes seven countries namely Pakistan, India, Sri Lanka, Bangladesh,
Maldives, Nepal and Bhutan. Its objectives are
1) To promote the industrial development.
2) To provide the finance of industries.
3) To reduce the debt burden over the economy.
4) To provide the training and research facilities.
7. SAUDI PAK INDUSTRIAL AND AGRICILTURAL
INVESTMENT COMPANY
This company was incorporated in 1982 as a private limited company. The
objective was financing industrial as well as agricultural projects in private sector in
Pakistan. This company maintains its resources in foreign exchange to avoid adverse
fluctuation in the exchange value projects.
SMEDA
Pakistan Small and Medium Enterprise Development Authority (SMEDA) is
a state owned subsidiary of Pakistan Industrial Development Corporation and is based in
Lahore, Punjab, Pakistan.
History
Pakistan Small and Medium Enterprise Development Authority was formed under
section 42 of the companies ordinance 1984 Ministry of Industries and Production of
Government of Pakistan.
Introduction
Premier institution of the Govt. of Pakistan under Ministry of Industries
and Production, SMEDA was established in October 1998 to take on the challenge of
developing Small & Medium Enterprises (SMEs) in Pakistan. With a futuristic approach
and professional management structure it has focus on providing an enabling
environment and business development services to small and medium enterprises.
SMEDA is not only an SME policy-advisory body for the government of Pakistan but
also facilitates other stakeholders in addressing their SME development agendas.
Mission Statement
To function as the promoter & facilitator of SME sector in Pakistan by creating a
conducive and facilitating environment as well as providing and facilitating service
delivery to SMEs for enhancing their capacities and competitiveness.
SMEDA Objectives
1. Formulate Policy to encourage the growth of SMEs in the country and to advise
the Government on fiscal and monetary issues related to SMEs
2. Facilitation of Business Development Services to SMEs.
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3. Facilitate the development and strengthening of SME representative bodies’

associations/chambers.
4. Set up and manage a service provider’s database including machinery and
supplier for SMEs.
5. Conducting sector studies and analysis for sector development strategies.
6. Facilitation of SMEs in securing financing.
7. Strengthening of SMEs by conducting and facilitating seminars, workshops and
training programs.
8. Donor assistances for SME development of SMEs through programs and projects.
9. Assist SMEs in getting international certifications (such as UL, CE, DIN, JIS,
ASME, KS, etc.) for their products and processes.
10. Identification of service opportunities on the basis of supply/demand gap.

Exports through industry:

Nowadays we hear a lot about deficits and surpluses. Exports
or Imports both have their pros and cons. By exporting more we can make use of our
excess capacity and reduce our opportunity costs. Bulk exports can reduce the cost per
unit and help us attain economies of scale. Exporters can get high markup ratios from
international markets as compared to their local, domestic shares. At the same time
governments can also gain from these markup receivables. The cautious exporter may
reduce his risk by spreading it over different demand conditions thereby, if demand of a
particular item falls in one country it rises in another.
There are many factors that help and hinder in making a country competitively attractive.
Some countries have access to natural resources or climatic conditions. In the same way
Pakistan's overall climate is good for growing Cotton, Wheat, Rice etc. Natural
Resources may also include certain acquired resources like, skilled labor, which can
make that little bit of difference that hangs between a developed, and an underdeveloped
country.
Pakistan's exports stood at $17.011 billion in the financial year 2006-2007, up by 3.4
percent from last year's exports of $16.451 billion

We maintain a large portfolio of products. In Value added or Export industries we

have

Leather,
Textile,
Footwear,
Surgical Goods
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Sports Goods,
Carpets,
Frozen Concentrated Citrus,
Juices,
Sea -food,
Marble.
Raw cotton

Imports through industries:

Imports on the other hand are not bad altogether.
Through imports we can get cheaper and better quality goods. For example, Japan
imports rice because; its locally produced rice is relatively more expensive. We can
increase our supplies and make additions in our product line. By choosing the right mix,
we can achieve a harmonious blend. Where, we get the fruits of both, the exports and the
imports.
The main reason that Pakistan has to import many things and even it has the resources is
Skilled workforce, leave Pakistan. Pakistan is adding value to their skills and others are
reaping the fruits. Pakistan invests in them, help them go through the initial growth stage
and when the momentous point is reached these finished value-added products are
shipped out.
Pakistan's imports stood at $30.54 billion in the financial year 2006-2007, up by 8.22
percent from last year's imports of $28.58 billion.
The major imports of Pakistan for industry are:
Textile machinery
Electrical machinery
Agricultural machinery
Fiber
Silk yarn
Insecticides
Plastics
Medical products
Iron
Steel

Tendency of industries
Since independence, Pakistan has faced many problems in the development
of its industrial sector. These difficulties was mainly due to the wrong and
biased policy of the British Government in the United India. The British
Government deliberately ignored the indstrial development of Muslim
majority areas. Thus on partition, Pakistan received only 34 industrial units
out of 921 operating in the United India. As a result of this policy Pakistan
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had to take a fresh start to build up its industrial sector on stable

foundations.

Pakistan’sindustrial sector was very weak after partition. The industrial

development was very low. However the industrial sector received a little
boost during 1960-70. By 1983-84 the industrial sector’s contribution
reached 20% in the national products which made it the secound largest
sector, after agricultre, in the national economy.

In 1959 the Government devised

a new policy by which emphasis was lid on the establishment of those indutries gor
which the material was available within the country. A number of corporations were set
up to render assistance for the rapid industrial development of the country. Due to these
steps Pakitan has beenable to achieve a fairly broad base in manufacturing. Pakstan is
now producing chemicals, steel, heavy engineering machinary and tools. Pakistan has
also produced the items of domestic use like cement, sugar, fertilizer and steel items. A
Steel Mill with Rusian assistance have been establshed at Pipri near karachi.

Employment through industry

Employment

People aged 16 or over are classed as employed by the Labor Force Survey (LFS) if they
have done at least one hour of work in the reference week or are temporarily away from a
job (for example, if they are on holiday). The number of people in employment is different
from the number of jobs in the economy, because some employed people hold more than
one job. A measure of the number of jobs in the workforce can be found in other surveys,
such as the Workforce Jobs series.
Unemployment is a central problem because when unemployment is high, resources are
wasted and people's incomes are depressed; during such periods, economic distress also
spills over to affect people's emotions and family lives.
But now due to the number of increasing industries the situation is changing and people
are getting work.
Many people are now working in some industries and those who do not get jobs,
government and NGO’s are providing them finance so they can open there own
industries, small or medium. Through small and medium scale industries the
unemployment rate is coming downwards and employment rate is increasing through
which our economy is progressing and economy is developing.

Capital output ratio:

Capital Output Ratio is the ratio that shows the amount of units of capital that are needed
to produce a certain level of output.
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A high capital output ratio means a large amount of capital is needed for production as
economic growth increases, and therefore exaggerates the trade cycle

. The Accelerator Theory suggests that the level of net investment will be determined by
the rate of change of national income. If national income is growing at an increasing rate
then net investment will also grow, but when the rate of growth slows net investment will
fall. There will then be an interaction between the multiplier and the accelerator that may
cause larger fluctuations in the trade cycle.

The Incremental Capital-Output Ratio (ICOR), is the ratio of investment to growth

which equals to 1 divided by the marginal product of capital. The higher the ICOR, the
lower the productivity of capital. The ICOR can be thought of as a measure of the
inefficiency with which capital is used.