When Pakistan was formed in 1947, the new state had to start almost from a scratch. The areas which constituted Pakistan were mostly agrarian and backward and were dominated by a few feudal landlords. The few industries it inherited were based on either handicrafts or on processing of agro-products.
The country's industry and trade were again largely under the ownership of Hindus and Sikhs who left the country with their capital immediately after the partition.
These communities had managed much of the commercial activity of West Pakistan. Hence their departure caused a vacuum in these critical areas. Pakistan's initial problems were further aggravated by the influx of a vast number of refugees. It is estimated that nearly 12 million people from India migrated to Pakistan during the first three years of partition.
The partition of the sub-continent disrupted the principles of complimentarity that earlier prevailed in the region. For instance, West Pakistan traditionally produced more wheat than it consumed and had supplied the deficit areas in India. Cotton grown in West Pakistan was used in mills in Bombay and other western Indian cities. Manufactured products such as coal and sugar were in short supply in areas that constituted Pakistan and came from areas today part of India.
The division of administrative machinery, the Indian Civil Service and the Indian Police Service, was also problematic. Out of a total of 1,157 officers, only 157 joined the Civil Service of Pakistan, which became one of the most elite and privileged bureaucracies in the world. The substantial irrigation network inherited from British rule was the only redeeming feature of the new state.
Given the predominantly agrarian nature of the economy at partition, a viable irrigation system was a necessary input for the revival of the agrarian economy, given the inadequacies of other infrastructure such as roads, power, railroads, etc.
The Early Years: Quest for Survival
In the early years (1947-58), economic policy and planning in Pakistan was dominated by a small group of bureaucrats. Given the profound adverse conditions at the time of partition, the focus of the economic planning was on keeping the economy going.
The herculean task of building an economic base was left to the state sector as the private sector was too weak and lacked the capital to launch industrial development in the country. An analysis of economic policy from 1947-58 shows a series of ad hoc reactions to crises.
The Korean War of 1952, however, proved a blessing for Pakistan by causing an upsurge in demand for Pakistani exports, mostly raw jute and raw cotton, and assisting in the creation of a nascent entrepreneurial class. It was this windfall that laid the foundation of industry in Pakistan. The end of Korean boom led to a reexamination of policy that led to the rigid system of import licensing designed to manage Pakistan's adverse balance of payment problem.
The cumbersome web of administrative and licensing control that resulted later formed the back bone of Pakistan's import substitution strategy. Thus, the first decade after independence was essentially bureaucratic-led and assisted industrialisation. Since much of the bureaucracy was composed of urban migrants from India, it had little knowledge of or interest in agriculture and felt that manufacturing should receive far greater state patronage.
The big landlords and nawabs who enjoyed some political clout could not translate it into economic clout. While a small number of industrialists who secured high profits in the early years acquired economic clout, they did not have the political clout; they were dependent on the benevolence of the licence raj of the civil servants. With disarray in the ranks of the political groups that existed, the military stepped in to restore law and order and to promote bureaucratic capitalism that had emerged in the 1950s.
The Ayub Decade of Development...
Please join StudyMode to read the full document