Pakistan Institute of Development Economics



Pakistan’s Industrial Experience and Future Directions

Author: A.R. Kemal

This paper examines the growth and patterns of industrial production and investment activities in Pakistan during the last fifty years, 1947–1997. The industrial strategies pursued so far and the levels of efficiency and protection in the manufacturing industries are also examined. It shows that the growth rate of the manufacturing sector exceeded 8 percent up to the 1980s, but in the recent years, it has slipped to around 3 percent. Keeping in view the current sluggish output growth and inadequate investments in the industrial sector, it is recommended that Pakistan must pursue the efficient industrialisation strategy. For this purpose, the country has to pursue the sole objective of accelerating the pace of industrial investment activities and the tariff structure has to be changed in such a way that the activities chosen accord with her dynamic comparative advantage. In addition, the government will need to influence the structure of incentives, which are largely governed in Pakistan by the protection structure. The government must provide the necessary physical and social infrastructure for efficient industrialisation. Augmenting the science and technology apparatus of the private sector, bringing research institutions up to the international standards, and streamlining of technology creation, absorption and diffusion systems are essential to diversify production towards new technology-based industries. Cluster approach (i.e., an agglomeration of key industries, supporting sectors, infrastructures, and institutions that are interlinked and interdependent) can be quite useful in the development of vendors. The regulatory framework needs to be streamlined. There is also a need to improve outdated and overlapping laws regarding the industrial sector. Human resource development (through cluster approach) would improve industrial efficiency through innovations. Consistent and stable policies and improved law and order situation are pre-requisites for efficient industrial development in Pakistan.

A.R. Kemal