Role Of Industrialization In Economic Development Economics Essay

Role Of industrialization In Economic festering Economics EssayINTRODUCTIONIndustrialization is regarded essential for rapid increase of the country since industrial revolution. The countries which merely rely on cultivation hurl re of imported under developed, whereas nations which developed industries achieved high local anaesthetic anaestheticises of knowledge. The advanced countries encourage industrial enterprise on large measure and transferred advantages to agriculture. They achieved balance of growth in different spheres of economy. Pakistan at the time of relegateition in 1947 has negligible industrial base. The political science has been utilizing all ready(prenominal) resources for rapid ontogenesis of the manufacturing heavens.We examine the industrial functioning as fol beginningsFrom 1947 to 1950In 1947, in the West Pakistan the major product was cotton but there was no big factory to service and counterbalance the cotton whereas East Pakistan was the main producer and supplier of jute. Out of 921 Pakistan unaccompanied got 34 industries. Government of Pakistan being aware of the importance of industrialization called an industrial conference in dec. 1947. The conference recommended the orderment of industries which used locally produced unexampled material like jute, cotton and skin. The private celestial sphere was encouraged to establish industries. For the implementation of above a development board and Pakistan industrial and assign weed were conventional in 1948. The donation of industrial sector to gross domestic product was 6.9% in 1950.From 1950 to 1960The private sector did non identify in massive industries collect to wishing of with child(p), technical knowhow and absence of entrepreneurship. The regimen took initiative and established PIDC in 1952. The major coronation of PIDC was in paper and paperboard, cement, fertilizer, jute mill around and suigas pipelines. The contribution of industrial s ector to gross domestic product rose from 9.7% to 11.9%.From 1960 to 1970This socio-stinting class covers 2nd pentad and 3rd five year plan. In 2nd five year plan 22.2% of the total fall outlay was for the growth of industrial sector. The country achieved self-importance sufficiency in essential consumer goods. The contribution of industrial sector to gross home(a) product went up to 11.8% from 1960-65. The 3rd five year plan could achieve a partial success due(p) to war with India in 1965. The growth swan was 7.8% against the target plan of 10%.Growth in 1970sThe industrial performance of production, growth and exports was disappointing from 1971 to 1977. The main reason were separation of eastern United earths Pakistan, suspension of contrary aid, fall in exports due to loss of marketplace ( east Pakistan), devaluation of rupee up to 131%, nationalization of industries, labor unrest, recession in world markets and reduction in investment incentives. The annual growth rat e fell up to 2.8%.Growth from 1977 onwardThe political sympathies took bout of initiatives to order the economy. Some industries were de changed and private sector was encouraged to invest. The growth rate was 5.7% in 1989-90.Current GrowthAccording to the sparing survey of Pakistan, 2009-2010, manufacturing accounts 18.5% 0f GDP and 13% of total employment. Large scale manufacturing and small scale manufacturing accounts 12.2% and 4.9% of total GDP respectively.Manufacturing Sector in Regional CountriesRole of industrialization in economic developmentThe role of industrial sector is summarized as followsIn industrialization there is optimum utilization of scarce resources. The timber and quantity of manufacturing sector increase. It increases the national income of the country.It increases the production of goods and services. The labor receives higher wages. The income of workers increase and there surviving standard also improvesWhen industrial production increase that incr ease exports and revenues of the government.It generates hot employment opportunities.Industrialization provides machinery like tractors, threshers, harvesters and spray machines to increase the production of agriculture sector.As the industrial sector expands, its production increases and cost of production decreases. The quality of products improved due to technologyIndustrialization increases the supply of goods for internal and away markets. The government receives revenue in the form of custom and excise duties, gross sales and income taxes from the industrialists due to which government revenue increases.Causes of industrial backwardness in PakistanThe main causes of industrial backwardness are divided as followsHistorical CausesThe British collected crude(a) material for their industries from subcontinent on the one exceed, on the oilier they captured this vault of heaven for final products. So no intentness in this area.The areas with Muslim majority were kept backw ard to favor Hindus.The few industries, which were setup in India, were in coastal cities of Calcutta, madras and Bombay.Raw material and skilled labor were not available in the area that is now in Pakistan.Economic CausesThe infrastructure requisite for the growth of industries is inadequate. For the foster mobility of labor, seat of government, transport and communication facilities are in sufficient. It is obstructing expansion of industries in Pakistan.The amount if capital require in the capital intense industries like steel, iron, chemical and automobiles quite high. Huge capital is also required to establish and expand industries like cloth, carpet, net derive and paper etc. most(prenominal) of exports are comprised of raw material, while our main imports are machinery, petrol which requires lowering inappropriate exchange. Due to shortage of foreign exchange, less imports of machinery, this leads to less development of industries. immediately days due to inflation people have low level of income thats why they demand less industrial goods, it obstructs industrial development. in that respect is also shortage of power like electricity and gas due to which many industries are shutting blue. there is less foreign investment in the country due to terrorism which is also the main bank vault in industrial development.Due to recent flood, the economy of the country is passage worst. Therefore people do not take risk to invest in Pakistan.Political CausesThere have been frequent changes in government since 1947 in Pakistan due to which local and foreign investors hesitate to invest in long term projects.Kashmir issue has been a bone of contention between Pakistan and India since independence. mountain remain frightened about the war between two countries. This situation leads low investment.The government of Pakistan nationalized industrial sector in 1970s. People still fear that the government may once again nationalize the economy. Therefore t hey invest less.Social and Geographical CausesOn the one hand there is less awareness to invest in large scale industries due to lack of education and information. On the other hand the capital intensive industries require highly qualified professionals which are in lack of Pakistan. So low industrial development.Pakistan has extreme climate. Sometimes we have drouth and other time heavy rain and flood. Moreover most of the make for is covered with mountains and deserts.PRINCIPAL INDUSTREIS OF PAKISTANThe principal industries of Pakistan are as followsTextile sedulousnessIt is the most important and largest industry of the economy of Pakistan. Pakistan received 17 textile units in 1947. The industry is facing problem like shortage of raw material, tough competition in international market due to domestic high costs.Sugar attentionIn 1947, Pakistan received two boodle mills. Now we have 78 sugar industries across the country. The industry is producing 2.4mn tones of sugar agains t 2.9mn tines of demand. Pakistan is importing sugar since last few years. The production of sugar sess be increased by giving incentives to farmers.Chemical industriousnessThere was hardly any chemical industry in 1947. Now Pakistan has 12 units but this industry is not conflux domestic requirement of chemicals.Fertilizers IndustryFertilizer plays an important role in increasing agriculture production. At present 10 units are producing different types of fertilizers which meets 70% of the domestic requirement. 30% is imported from Germany, UK, USA and Norway.Cement IndustryThere are 25 cement plants in Pakistan. The installed cleverness of these plants is 13mn tones per annum. This industry is found on local raw material.Jute IndustryAt the time of independence there was not a single unit of jute in Pakistan. At present 12 units are working in Pakistan but they are not meeting domestic requirements. Large quantity is imported from china and Bangladesh.Engineering Goods Industry This industry got importance in 3rd five year plan. Now there are four industries like HMC Taxila, Heavy Foundry Taxila, Pakistan tool Tool Factory Landhi, and Pakistan Steel Mills Karachi.Pakistan Steel Mills CorporationThe mill was set with the total cost of 25.550mn with the help of Russia. Its productive capacity is 1.1mn tones of raw steel per annum. Now a day it is going down due to corruption and mis concern.Cigarette IndustryAt present Pakistan has 22 factories producing cigarette at Jhelum, Akora Khattak. The raw tobacco used in manufacturing is produced domestically. exploit OF PUBLIC INDUSTRIAL SECTORThe performance of public industrial sector is the role of PIDC, so we review the role of PIDC.Role of PIDCPakistan industrial development deal (PIDC) was established in 1952. It was the only public sector manifold in manufacturing. It established industries in backward areas, created employment opportunities and reduced regional disparities. By June 1972, it had establish ed 60 industrial projects. The nationalization of industries under the economic reforms order affected the performance of PIDC. A number of important and profit yielding projects were transferred to other rafts under the Presidential Ordinance No. v of 1974. PIDC was left with only 8 projects out of 60, which were not profit making. communization OF INDUSTRIESThe government of Pakistan under the economic reforms order, 1972 nationalized 32 private industries. The 52 projects already under taken by PIDC and the 32 nationalized units were regrouped on functional footing and laced under 12 spates. The corporations wereFederal chemical and ceramic corporation (FCCP)Federal light engineering corporation (FLEC) internal design and industrial services corporation (NDISC)State heavy engineering and machine tools corporation (SHEMTC)Pak tractor corporation (PTC)Pak automobile corporation (PAC)National fertilizer corporation of Pakistan (NFCP)State electrical corporation (SEC)Pakistan indu strial development corporation (PIDC)Pak steel mills corporation (PSMC)State cement corporation of Pakistan (SCCP)State petroleum refinery and petrochemical corporation (SPRPC)In 1974, PTC and SEC were merged in PACO and the number of corporations was decreased from 12 to 10. Later on FLEC, NDISC and SHEMTC were merged into state engineering corporation (SEC). The number of corporation was decreased from 10 to 8.Reasons of Nationalization failureThe public manufacturing sector was burdened with a number of conflicting tasks and objectives which reduced its efficiency.The corporations were over staffed and were broadly managed by non-professionals persons.The labor unrest reduced performance.The skilled personnel migrated to disconnect States and caused shortage of skilled persons.The prices of raw material increased due to sink in production of the corporations on account of flood and untimely rains.The price of petroleum products increased and raised the cost of production.PRIVAT IZATION OF SOEs IN PAKISTANIn the prime(prenominal) four decades the government form _or_ system of government about the private and public sector has not clear. In 1988, the government issued disinvestment ordinance to adopt the policy of privatization. The governments privatization policy is to off-load the public sector the process would e carried out in iii phases. Different institutions will be sold to private sector and the revenue generated will generally be used for debt retirement.Meaning of PrivatizationA process of transferring state owned enterprises to the private sector.Objectives of PrivatizationMinimizing budgetary support/deficit exchange of circumstancess of enterprises to fill budgetary gapIncentives for the workers for efficient workDeveloping share marketProvision of share ownership to workers or employeesInsulating the economy from political interferenceAchieving rapid industrializationMethodology of PrivatizationThe privatization can be undertaken in the f ollowing waysSale of individual SOEs by inviting bids from the private sectorSale of shares of SOEs through stock exchangeEncouraging employees to make management groups and purchase enterprisesEncouraging prospective investors to form modaraba companies to purchase the shares of SOEsEntering into choose management contracts with employees for a specific period to enable them to buy out unitsPrivatization of SOEs in PakistanThe government of Gen. Zia-Ul-Haq on 16th July 1988 issued Disinvestment Ordinance and a National Disinvestment Authority was created under the chairmanship ofAziz Zulfiqar. A privatization commission was formed on July 22, 1991 to word recommendations for privatization and deregulation. In the initial phase MCB, ABL had been privatized.IMPORTANCE OF FOREIGN INVESTMENT IN INDUSTRIAL DEVELOPMENTThe policy of privatization, deregulation and liberalization has greatly widened the foreign investment in the country. The government has taken several measures to incre ase the play of foreign private investment. The foreigners can now avail monetary and financial concessions equally with the local investors. They can invest in the fields of their pickax like power generation, petro-chemical petroleum gas fertilizers, hi tech industries, agro based industries and export oriented industries.Incentives to Foreign InvestorsForeign exchange controls have been relaxed for foreign investors.Foreign investors can participate in local projects on par basis.Ceiling on payment of royalties abolished.No requirement of obtaining NOC from provincial government or locating the projects anywhere in the country except notified prohibit areas.SOURCES OF INDUSTRIAL FINANCEThe main sources of industrial finance areIndustrial Development Bank of PakistanInvestment Corporation of PakistanNational Investment pullEquity Participation FundBankers Equity FundModarabas, Leasing CompaniesCOTTAGE AND pocket-sized SCALE INDUSTRYThe bungalow and small scale industry has a great significance for a developing country. It forms as important part of the manufacturing sector. It contributes 5% to GDP and employees 80% of the labor force. Its share in manufacturing sector export is about 30% in Pakistan.Cottage IndustryThe industry which is carried on in the home of the artisan is known as cottage industry. He is usually assisted in his work by the members of his family and the traffic may be whole time or part time. E.g. woodland work, handmade carpets, toys etc.Small Scale IndustryThe firms employing less than 10 persons are classified as small scale industries in the national accounts and its fixed assets do not exceed Rs. 2mn in Pakistan.CONCLUSIONWe can conclude that manufacturing is the third sector of our economy and it is the backbone of any country. It plays a very important role in the economic development of a country. Pakistan has been a backward country in industrial sector due to different historic, political and economic causes. For the revival and growth of the industrial sector, these problems should be solved. The law and order situation must be improved. The security of capital must be assured and the degree of bureaucratic control to be minimized. A clear cut policy should be chalked out for the local and foreign investors. The industrial growth can further be speed by ring sick industrial units into operation, installing new factories and providing utmost incentives to the working community.