The causes of industrial backwardness in Pakistan are varied and complex. The Government of Pakistan since 1947 is trying to develop industries and infrastructure facilities for the growth of industrial sector, yet it has not achieved success to the desired extent. In the last over three decades the main obstacles which have slowed and retarded industrial development in Pakistan are as follows:
The first and the foremost cause of the backwardness of the industry has been the political instability which has led to instability of policies. Each successive government unveils its own policies and disposes of all policies of previous government after it takes over. In the wake of such negligence from government’s part, the industrial sector is suffering a great setback.
Lack of Capital:
Furthermore the lack of capital is a major hurdle in attaining self-sufficiency in industrial sector. Every industry requires a large sum of capital to keep its wheel moving. But due to the lack of capital and loan facilities the progress of industry is lingering.
Limited market is also the major cause of industrial decline. Pakistan manufacturing sector have high costs, low labor productivity and inefficient production processes. There is a threat by the Chinese and Indian manufacturers to gain most of the market share. Owing to government’s indifference, our domestic markets have not expanded to an extent to accommodate the home-made goods.
Peoples’ Liking to Foreign Goods:
Moreover our peoples’ liking to foreign goods is also giving a severe blow to our industry.
Under Utilization of labors’ Potential:
The proper utilization of the capabilities of the labor plays a very vital role in the progress of the industry. By fully utilizing labor capabilities the production can be improved and increased. But unfortunately, under-utilization of labors’ potential on right place is causing a great loss and industry is lagging behind to compete with the world.
Communication and Transportation:
Communication plays a very important and vital role in industry’s progress. If communication is in disorder, industry fails to survive. Due to lack of transportation and absence of basic infrastructure like roads, water supply, sanitation and proper disposal of waste water and solid wastes, our industry is lagging behind. Lack of basic infrastructure along with the expensiveness of means of transportation and communication is also contributing to industrial failure.
Technical Know- How:
The significance of technical knowledge to industry cannot be negated. Industrial progress is dissatisfied in the absence of workers equipped with technological knowledge. The scarcity of such technically experienced labor force makes the journey towards industrialization challenging.
Energy crisis is further a bolt from blue for our industry. Our country is starving in electricity, oil and gas which are the most essential requirements to run industry. In spite of having vast resources of gas, oil, coal etc. our country is unable to provide uninterrupted supply of fuel to industry which is creating havoc to this sector.
Economic restrictions imposed by donor countries and lack of effective exploitation of the World Market are also contributing to our industry’s failure.
Lack of Modern Technology:
To a large extent, all segments of the textile sector from cotton cultivation to manufacturing of garments lack modern technology.
APTMA has highlighted that the Pakistan textile industry faces tough competition from the Indian, Bangladeshi and Chinese textile industries through modern equipment and machinery. The inability to timely modernize the equipment and machinery has led to the decline of Pakistani textile competitiveness.
Pakistan is facing new competitors (Bangladesh, Vietnam and Turkey) in industrial sector. Though we cannot avoid competition but we can always stay ahead of them by reforming our strategies and educating our entrepreneurs so as to move one step forward in every aspect.
Low Foreign Investment:
Low foreign and local investment is a matter of concern. Due to terrorism and security concerns in Pakistan the foreign investors are reluctant to invest in industries so that net foreign investment in Pakistani industries is only 0.5% of GDP. Not only local businessmen but also foreign investors are not ready to set up new industries and make investments. They are reluctant to invest their time and money in the country which is lacking in basic infrastructure and where law and order situation is deteriorating day by day. All these things are acting as repellent for industrialists and in turn industrial development.
Granting MFN Status to India:
Granting MFN status to India will negatively affect the domestic industry of Pakistan as the industry will have to face tough competition in the terms of price and quality. The imported finished products from India will be available at lesser price as compared to our domestically produced items. The major reason is our high cost of production which includes cost of energy, raw material, cost of capital and high wage rate as a result of inflation. However the better option can be the import of raw material, modern technology and equipment for lowering the cost and quality of our own products and thus increasing the exports and becoming competitive in the local market as well.
High interest Rate:
Bangladesh, India and China enjoy comparatively low interest rates than Pakistan. The high interest rates increase the cost of capital that is a discouraging factor for the businessman and future entrepreneurs. This also demotivate the foreign direct investment.