Reasons for industrial Backwardness

No doubt Pakistan is an agricultural country. Industrial sector is the second largest sector of the economy contributing 19% to GDP of Pakistan and employing a large number of population of the country. At the time of partition of Pakistan the contribution of industrial sector to GDP was only 7.75%. Pakistan had negligible industrial base at the time of partition.
Due to industrial development, overall economic development increases, GDP increases, employment opportunities expand, per capita income increases, living standard of people improves and the overall economic position becomes very bright and hopeful.
The advanced countries of the world like USA, Germany, France, Sweden, UK, Japan and Canada encouraged industrialisation on a large scale. Not to talk of western countries, the Far Eastern countries like Taiwan, Korea, Hong Kong, Singapore and Malaysia, etc, have progressed much in industrialisation. Although Pakistan has expanded much as compared to the situation at the time of partition. Pakistan is still lagging behind in industrial sector.
Before independence, Pakistan lacked industrial base. Such area of sub-continent, which now comprises Pakistan, was just agricultural raw material producing area. The British rulers used to take away the raw material for their industries located in Britain. After manufacturing they sold their finished goods in our country.
Accordingly the industrial development could not be promoted in the sub-continent, particularly in the areas as now comprising Pakistan. The areas with Muslim majority were kept backward deliberately to favour the Hindus. It shows the malice and prejudice that the British had against the Muslims. So we inherited the industrial backwardness.
THE IMPORTANT REASON OF INDUSTRIAL BACKWARDNESS NOWADAYS IS: In our economy high inflationary tendencies are prevailing, that are severely affecting the industrial efforts in the country. The inflation in the country, which started appreciably after 1972's the prices of imported machinery, oil, chemicals and spare parts are rising very sharply. In 1973 at international level crude oil price was 3 dollars per barrel. In 2008 it crossed to 147 dollars per barrel.
Due to increase in the prices of oil, gas, electricity and wages the cost of production is increasing day by day. Due to high price Pakistani industrial goods cannot compete in the international market, so due to less demand industrial sector is not expanding. Industrial sector depends upon the agriculture sector, especially the agro based industries like textile and sugar industries totally rely on agriculture raw material. But Pakistan's agriculture sector is backward.
Although agriculture sector has largest contribution of 22% to GDP and 66% population of Pakistan live in rural areas. But there is lack of technology, fertilisers, pesticides, water, seeds, latest machinery, and proper marketing system and consultancy services for farmers. Due to all these factors, our per acre yield is low. Due to expensive and short supply of agriculture raw material our industrial sector is suffering.
Lack of capital is a major hurdle in the way of establishment of heavy industries in Pakistan. There is shortage of both kinds of monetary and physical capital. In Pakistan, savings rate is hardly 13% to 14% which is very low. Pakistani society is basically consumption oriented.
The investors are not provided with sufficient and reasonable amounts of loans. The banks follow strict conditions and tedious procedures while advancing the loans. The bank loans are granted to big and affluent persons while the small businessmen are discouraged by in a number of ways, for example, by charging the higher interest rate.
The basic infrastructure for industrial development in Pakistan is inadequate. For example, transport and communication facilities are not enough to foster the mobility of labour and capital. Energy resources like electricity, gas, water and fuel are very deficient. Currently Pakistan's industrial sector is facing serious shortage of electricity, while electricity is a basic producing element. Because of persistent loadshedding and high rates of electricity and gas, industrialists are in serious trouble and are suffering from losses.
In Pakistan bureaucrats follow those practices which were used by the British rulers. Red-tapism and departmental procedures are the big obstacles in the way of industrial development. Licences, NOCs, utility connections like gas, electricity and water etc cannot be achieved easily. The investors have to face the derogatory and humiliating behaviour of tax imposing people. These factors are discouraging domestic and foreign investors to invest in industrial sector. We suffer from lack of initiative.
The capitalists are often shy and hesitant in investing their capital in new ventures. If marketing and technical services are provided for channelising their investment among competing industrial units, they can come forward for investing the capital in different avenues. In our country research and institutions are very few and their output is not proper. Especially the small and medium investors are deprived of the benefits of research.
Investors are unaware of the latest techniques of production. There is political instability in Pakistan. In Pakistan's history no government could complete its tenure except the previous government. Due to improper law and order situation, terrorism, bomb blasts, racial and ethnic disturbances, inconsistent economic and industrial policies etc domestic and foreign investors are losing interest to invest in Pakistan. Rather home investors are shifting their capital to Dubai and other countries of the world.
Minerals like coal, iron, oil, and gas and different other metals are important components of industrial development. These minerals are found in different areas of Pakistan. But we have no technology and qualified technicians to explore them. Pakistani and foreign companies are not taking much interest in this area. For industrial sector such minerals are short and costly. So, Pakistan has to import these inputs from other countries.
In Pakistan literacy rate is only 55% while percentage of technically qualified people is very discouraging. There is lack of reasonable business administrators, entrepreneurs, technicians and engineers in the country. There are very few technical, engineering and polytechnic institutes in the country. That's why industrial sector is backward.
In Pakistan ratio of indirect taxes is higher than that of direct taxes. According to investors opinion high rate of indirect taxes is hurting them very much, like general sales tax and import duty etc. There is shortage of industrial estates, tax-free zones and export processing zones both quantitatively and qualitatively.
Pakistani goods are costly and substandard. These items cannot compete internationally, so export of industrial exportable items is less. Due to less demand from other countries industrial sector is not growing much. Concludingly we can say that political instability, law and order situation, loadshedding, absence of solid industrial planning and discontinuity in economic policies are responsible for the backwardness of industrial sector.