Problems of Industrialization in Pakistan - Essay Example

Running Head: Industrialization problems in Pakistan Industrialization problems in Pakistan Insert Name Insert Course Title Insert Instructors Name 5 December 2011 Industrialization Problems in Pakistan Introduction Pakistan is one of the developing countries in South Asia. The country is endowed with abundant natural resources and the population heavily relies on agriculture as an economic activity. About 27% of the countrys total land coverage arable land and over 50% of the countrys population are employed in the agricultural sector (Khan, para.1). To improve production, the country is attempting to industrialize her agricultural activities by adopting modern farming practices and use of technology implements. However, as a developing country, Pakistan has problems of industrialization that stem from different factors. These problems encompass the social, political, and economic aspects of the country includes factors like the countrys poor infrastructure, the low level of literacy characterized by lack of skilled labor, poor governance with unstable political environment, as well as the unfavorable fiscal monetary and fiscal policies that may discourage industrial investors. This paper expounds on the different factors undermining the efforts to industrialize the operations in the country and not the negative effects that may result from industrialization in a given country. The factors were identified from the responses in a survey that was carried out to seek information from a variety of industrialists in the country in relation to the industrialization problems they have encountered, or the factors they consider detrimental to the process. Thesis Pakistan is a developing nation that is dependent on agriculture as the country is endowed with fertile lands fit for the economic activity. Nonetheless, the process of industrializing her agricultural activities has been faced by several problems impeding the whole process. Industrialization Problems in Pakistan Electricity and energy shortages One of the major problems cited to impede the industrialization process in Pakistan is insufficient supply of electricity and energy in the country. Electric power and other energy supply are essential requirements for industrialization. Electric energy is used in driving most of the machines in an industry. Similarly, the mechanized systems also use other forms of energy like fuel from the petroleum products and biofuels in combustion to move machine parts in the lubrication of some moving parts. Just like the situations witnessed in many other developing countries, the country has insufficient supply of electricity. Frequent energy shortages in the country are a barrier to industrial development in the country (US Library of Congress, para.2). The power generation capacity of the country cannot support the required economic development prompting for outsourcing of energy resources (Khan, para.1). Her energy supply is among the lowest even in the category of the developing nations. The country has a per capita supply of 0.19 ton petroleum equivalent (Khan, para.1). The issue of poor energy supply as a hindrance to industrialization has been cited by the local industries like the textile industry (Khan and Khan, 21). The industries complain non-guaranteed and thus unreliable energy supplies. Lack of trained and skilled workforce The other important factor that was identified that undermines industrialization in the country is low level of education resulting into lack of skilled manpower. A large proportion of the Pakistani firms (about 70%) cite shortage of skills as one of their major challenges (Pakistani Development Forum, 19). There is a large mismatch between the required skills and technology in the country and what is available. The country has a high proportion of low-skilled laborers (about 60-75%), a relatively high proportion of medium-skilled laborers and very low proportion highly-skilled personnel (Pakistani Development Forum, 22). This last category comprises the skilled professionals like science and technology entrepreneurs, who are responsible for much of the industrialization initiatives in a given country. Pakistan is one of the Asian countries with high levels of illiteracy, a factor that can be attributed to the few number of years that individuals opt to spend in learning institutions. For instance, the average years for schooling among adults were only 3.9 in 2000 in Pakistan (Pakistani Development Forum, 23). This was only better than Bangladeshs 2.6 while it is far too lower than 8.2 and 7.0 recorded for Philippines and East Asia respectively Poor/underdeveloped infrastructure The infrastructural facilities in a given country do not just signify the level of development in a country but also promotes further industrialization in the country. The transport and communication system are essential for the industrialization of an economy as they necessitate the easy flow of information and tangible materials. A region that is easily accessible attracts industrial investment thereby opening up such areas for more industrialization. However, the highways, communication systems, and housing in Pakistan are in insufficient supply and yet they are essential for the countrys sustainable development (Khan, para.1). The country is characterized by outdated infrastructure that does not support industrial development ((US Library of Congress, para.2). These factors affect the ability with which industrialization can spread and be adopted in a given region. Due to poor infrastructural facilities, industrialization has not penetrated into some of the less developed regions of Pakistan (Pakistani Development Forum, 17). Little emphasis on research and development Extensive research and development lead to creation of new and innovative ideas that are the characteristics of industrialization. Most of the industrialized nations achieved their current statuses because they had high considerations for industrialization as a key to economic growth (Pakistani Development Forum, 17). However, little efforts have been put by Pakistani government on industrial activity as one of the essential growth engines in a given economy. Little emphasis has been put industrialization by higher learning institutions and research and development institutions in the country. The institutions have weak connections between the domestic industry and the skills developed from their curricula (Pakistani Development Forum, 17). Due to such weak linkages, the country has so far recorded just a few industries being developed in the country like the textile industry. The lack of research and development has had negative impacts on the textile industry in the country (Khan and Khan, 22). Farmers have moved to other crops that have fewer challenges in terms of pests and diseases. Fluctuating law and order situations The business operations that are involved in establishment of industries are performed within established government regulations. The stability of such regulations and the mechanisms of their enforcement have high relations with a countrys investment and subsequent industrialization. The country has witnessed fluctuations in trade provisions like the removal and subsequent introduction of minimum tax on domestic sales (Khan and Khan, 23). The recent political instability in the country is another related factor. It has been stated that if Pakistan can keep political stability, it will maintain a satisfactory growth rate, develop a lot of new type privatized industries and increase their opening in foreign trade (Khan, para.1). The country has experienced political instability in the past and is in the process of recovering from the state. Another factor cited that relate to law and order was high level of corruption by the public officials while processing the business procedures. Firms then lose a sense of security for their investments. It was observed that the foreign direct investments in the country dropped significantly in 2009 due stalled privatization program, low levels of insecurity and deteriorating economy of the country (World Bank, 17). Declines in foreign direct investment Foreign direct investments contribute significantly towards the industrialization in a given country. This is due to the new ideas and technologies that are imported into the country by the foreign investors. The local employees of these foreign organizations can learn and adopt the new technology and apply, which can then extended to the local companies as well. The government of Pakistan has been making efforts to attract foreign investors through the removal of trade barriers, liberalizing the investment regime, and providing other incentive, an initiative that has recorded no positive results in the recent years (Zakaria, 2). In the first half of 2008/2009 fiscal year, the foreign direct investment has decreased by about 73% from the figure realized the preceding fiscal year (Khan, para.1). The foreign direct investments decreased to US$ 142.1 Million from US$306 million recorded last year whereas indirect investments have increased by US$ 67.4 million (Khan, para.1). Even the domestic investment in the country has not shown impressive results despite the incentives put by the government to attract investors (Zakaria, 9). Higher Interest Rates for Industrial Groups The fiscal and monetary policies in a country also affect foreign and domestic investment in the country. The textile industry is one of the developed industries in the country. However, the All Pakistan Textile Mills Association has cited that high interest rates are among the factors that hinder their continued growth and development in the industry (Khan and Khan, 21). The association also laments of high costs of inputs and all these factors are attributed to the poor government policies in the country (Khan and Khan, 21). Conclusion The country has been making efforts to promote its industrialization but the efforts have had no positive yields. The low of infrastructure in the country, the staggering economy, less commitment to innovative research by the relevant institutions, the shaking government, and poor government policies are still significant factors impeding the industrialization process. The foreign direct investors, who can contribute significantly to industrialization through introduction of new technologies, are not attracted to a country with such deficiencies. Works Cited Khan, Aftab and Khan, Mehreen. Pakistan Textile Industry Facing New Challenges. Pakistan Textile Journal, Iss.14. May, 2010. Khan, Mashood. Industrialization and its importance to the economic development of Pakistan, 2011. 05 December 2011. http://mashoodkhan.hubpages.com/hub/Industrialization-and-its-importance-to-the-economic-development-of-Pakistan Pakistani Development Forum. Pakistans Industrialization Strategies. 2007. 05 December 2011. https://docs.google.com/viewer?a=v&q=cache:bTtkTwKTnRkJ:siteresources.worldbank.org/INTPAKISTAN/Resources/Presentation-by-faisal-bari-sess-V.pdf+&hl=en&pid=bl&srcid=ADGEEShTaAFEMGbXMdStxXFi8zyVSzx0qP3B5MWc5UV7AUGYNppX_5IaNG_2uoW4ygP0KJK_n_7BUjkxs2vAOT1LosZBakHIBNm3v1oS18794lnaLcpwl8nogMWvQblPvF3XquRoICrp&sig=AHIEtbTuh2DaQKljhPvuMVqyR1DpDxUvyg&pli=1 US Library of Congress. Pakistan: The Economy. 2011. 05 December 2011. http://countrystudies.us/pakistan/44.htm World Bank. Global Development Finance 2011: External Debt of Developing Countries. Washington, DC: World Bank Publications, 2010. Zakaria, Muhammad. Investment in Pakistan: A Critical Review. MPRA Paper No.11543, Nov 2008. Read More