Political Instability and Its Effects on Pakistan's Economy

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Overview of Pakistan’s Economy

Pakistan was a very poor and predominantly agricultural country when it gained independence in 1947. Pakistan's average economic growth rate since independence has been higher than the average growth rate of the world economy during the period. Average annual real GDP growth rates were 6.8% in the 1960s, 4.8% in the 1970s, and 6.5% in the 1980s. Average annual growth fell to 4.6% in the 1990s with significantly lower growth in the second half of that decade. Farming is Pakistan's largest economic activity. In FY 1993, agriculture, and small-scale forestry and fishing, contributed 25 percent of GDP and employed 48 percent of the labor force. Agricultural products, especially cotton yarn, cotton cloth, raw cotton, and rice, are important exports. Although there is agricultural activity in all areas of Pakistan, most crops are grown in the Indus River plain in Punjab and Sindh. Considerable development and expansion of output has occurred since the early 1960s; however, the country is still far from realizing the large potential yield that the well-irrigated and fertile soil from the Indus irrigation system could produce. The floods of September 1992 showed how vulnerable agriculture is to weather; agricultural production dropped dramatically in FY 1993. Pakistan had, during its early years realized the need for development of appropriate industrial infrastructure that included setting up industrial estates and an engineering base. The first such estate was established beyond Lyari in Karachi at the present Sindh Industrial Trading Estate, SITE at Manghopir road. It was provided necessary facilities such as water, roads, and waste disposal system. To augment the pace of industrialization, the Shipyard and Engineering Works was created to cater to the needs of engineering material, plant and equipment.

This might suggest that Pakistan did very well with the basics of planning for industrialization. However, there were a number of odds, which had to be attended to on an urgent basis. The Master Plan for Karachi had, in its early years, given top priority to resettlement of refugees who were otherwise occupying buildings of important institutions, schools, parks and footpaths all over the central district of the city. It was, however, soon realized that establishment of the industrial sectors in the industrial estates was accompanied by an unforeseen intensive land use change. The development processes proceeded in accord with the Master Plan and were keeping pace with them but not with the influx of thousands of persons looking for better opportunities of settlement and employment. The industrial estates and their neighbourhood were constrained by the lack of pre-requisites i.e. they were not provided the industrial infrastructure.

Water, power, fuel and roads the basic amenities were difficult to provide with limited financial resources at the outset and very difficult to maintain subsequently. The industrial infrastructure therefore could not be put in place for all those interested in setting up industries. The available resources, because of the pressing demand, had to be spread too thin. Furthermore, whatever was available could not be maintained because of the lack of a suitable strategy for maintenance. This was among the many reasons for the slow pace and non-sustainable nature of industrialization in Pakistan. It soon became clear that Pakistan had erred in industrializing the country without having the appropriate industrial infrastructure in place. Industrial Infrastructure has a large number of components and includes entrepreneurship, availability of raw material, credit facilities, linkages with local and export markets, communication infrastructure for transportation of raw materials from and of manufactured products to markets, provision of dependable facilities such as water and waste disposal system, electricity, telephone, a chain of engineering industry units, high...
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