It is evident that Industrialization policies in Pakistan ...€¦ · It was carried out by G.F Papanek, which later on published as a book, “Pakistan’s Development-Social Goals

It is evident that Industrialization policies in Pakistan enriched the urban elites while Agricultural Policies enriched the rural elites. The Bulk of population didn’t benefit and many suffered reduction in the real incomes.

- Mehmat Ozay

Course: DS-202 Theory and Practice of Development Work

The Ultimate objective of anyprocess of economic growth is theReduction and Elimination of Poverty.

Poverty is further Divided intoAbsolute and Relative Poverty.

“Growth” is necessary but notsufficient, social and economicdevelopment should also be fulfilled.

Growth should be Carried with SocialJustice, without it would lead toGross Income Inequality, Social andPolitical Tension and IncomePolarization.

“Island of Prosperity in the ocean of

Poverty”

“Maximum Good for the Maximum

Number”

It seems Pakistan is able to overcome Absolute Poverty while there is a decrease is

seen in Relative Poverty.

Up till 1979, Rs.700 consider to be “Poverty Line” for an

Household.

As for household below poverty line is decreased from 60% to 40% from 1969/70 to 1984/85.

And also 20% increase shown in the income of household below

poverty line.

Rapid Industrialization has been a cornerstone of theeconomic policies since the birth of the Pakistan.

And also Pakistan was able make remarkable Growthin world in 50’s and 60’s

Yet, the Growth couldn’t trickle down to the rank of thepoor, whose Economic lot kept worsening.

“Hundred of millions desperately poor people throughout the world have been hurt rather than helped by the

Economic Development. Unless their Destinies become a major and explicit focus of development policy in 1970s and

1980s, Economic Development may serve merely to promote Social Injustice.”

-Adelman & Morris,1973

In Pakistan, the phenomena of extremeInequalities of industrial income and assetswas first highlighted by the ChiefEconomist of Pakistan in April 1968, whenhe stated:

“23 Industrial Houses owned 66% and 87% of the Industrial Assets and Banking and

Insurance, Respectively.”

Although some important studies were carried out in order to understand and the graveness of this industrial inequality. Among which following two are the most important study of all:

1. Papanek Study – 19592. Rashid Amjad Study – 1970

66%

87%

Only 23 Industrial Houses

It was carried out by G.F Papanek, which later on published as a book, “Pakistan’s Development-Social Goals and Private Incentives”.

3000 firms, out of which a group of 60 firms possessed 61% of all private Industrial Assets. And also among these 60 firms, only seven control one-fourth of the assets.

In Cotton Textile, 14 industrial houses possessed 52% of total assets. In Jute Industries, only 5 houses possessed 85% of the total assets. In Sugar Industries, only 4 houses possessed almost 56% of the total

assets. It give reputation to term ”Industrial Robber-Barons” (Captain of

Industry).

52%

48%

Cotton Textile

14Houses

Other 85%

15%

Jute Industry

5 Houses

Other 56%

44%

Sugar Industry

4 Houses

Other

Rashid Amjad study on “Industrial Concentration & Economic Power in Pakistan”.

1. First, the problem in national as well as regional perspective, separately position for West and East Pakistan and concentration of Industrial Assets was discuss.

2. Secondly, Industrial Houses which are dominating market.

But this study had some Handicapsalso:

1. The data was restricted only two years: 1961 and 1970.

2. The position of 1970 was compared with 1961 to measure the extent of the concentration and house monopolizing in the industrial assets.

Rashid Amjad Study stated, 41Houses were in control of 42% ofindustrial assets and 56% of privatedomestic assets in West Pakistan.

Out of there 41 houses, only 10 wereaccounted for the one-fourth onindustrial assets and 51% privatedomestic assets.

These 41 houses, produce 50% ofSugar, Cotton Textile, Paper andBoard, Automobile Engineering andMachinery Industry.

For which there is an decrease is notebetween 1961 and 1970.

In 1961 13 houses accounted for 30%industrial assets and produce 20%large scale production, this figuredecrease to 27% and 17%,respectively in 1970.

The ownership of the Commercial Banks and insurance companies were Largely vested in the industrial houses which controlled industrial assets.

As earlier, it was stated by Dr. Mhabub-ul-Haq, 23 houses control 86% of the Banking and Insurance sector.

Rashid Amjad’s study supported that view and concluded, in 1970, there were 9 major commercial banks containing the possession of 90% of the assets.

And for nearly 14 insurance Companies accounted 80% of the assets.

Until 1970, over 70% of PICIC loans were meant for Industrial Houses.

HBL

UBL

MCB

Adamjee

Commerce Bank

Australasia Bank

Bank of Bahawalpur

PermierBank

SarhadBank

PICIC (Pakistan Industrial Credit and Investment

Corporation)

IDBP

ICP (International

Corporation of Pakistan)

NIT (National Investment

Trust)

Following are some factors for the separation of United Pakistan.

Firstly, Industrial sector was filled by

the commercial communities;

Chiniotis, Bohars, and Memons, due to which they also warn a Huge profit by “Korean Boom”

Second, due to Import Restrictions these communities accumulated high

profits from domestic market.

Third, due to be the pioneer in the

industrial sector, they cultivated the

position of bureaucracy, and

maintain it through interlink marriages,

and influencing process of

economic decision-making.

Fourth, the policies of PIDC (Pakistan

Industrial Development Co-

operation), first dis-investing and when industries

were viable, purchasing them at special low prices.

As an Impact, United Pakistan

lose East Pakistan along with its unique

geography.

Out of 41 houses mention above, 25 Houses based in West Pakistan

suffer no loss.

Out of remaining 16 houses, One

belong completely to East Pakistan.

Out of rest 2 houses; Isphani and Bawa, belongs to West Pakistan

but had all their Assets located in East Pakistan, which was complete

lost costing of Rs.112 Million.

The Remaining 13 houses had assets in

both wings of Pakistan and suffered a loss of

Rs.852 million.

Bearing the total cost of

separating was Rs.964 Million for Industrial

houses.

Afterward, in 1972 Nationalization was further eroded.

In incurred a total loss of Rs.1,430 Million, on account for manufacturing and non-manufacturing and banking and insurance assets.

The effects on Large –Scale manufacturing, in the Pre-Nationalization period 41 Houses Accounted for nearly 42% of assets.

While after this figure dropped to 31% for 39 Houses in Post-Nationalization Period.

There are three

Criteria used to monitor

distribution of Income Inequality

in Pakistan:

Gini Coefficient Criterion

Household Income Share Criterion

Purchasing Power Criterion

Gini Coefficient of Pakistan fall from 0.39 in 1963-64 to 0.33 in 1970-71. which shows that the income inequality in Pakistan decrease to some extent in Pakistan.

1963-64 1966-67 1968-69 1969-70 1970-71 1971-72 1979 1984-85

Urban 0.44 0.39 0.38 0.37 0.37 0.38 0.4 0.4

Pakistan 0.39 0.36 0.34 0.34 0.33 0.35 0.37 0.39

Rural 0.36 0.33 0.3 0.3 0.3 0.31 0.33 0.3

0.360.33 0.3 0.3 0.3 0.31 0.33 0.3

0

0.1

0.2

0.3

0.4

0.5

0.6

0.7

0.8

0.9

1

In this criterion, the charges in income share over-time monitored.

6.4 7.6 8.2 8 8.2 7.9 7.5 6.9

17.5 19.2 20.3 20.2 20.6 20 19.2 17.9

45.3 43.4 42 41.8 41.5 43 45 46.7

30.2 28.3 27.3 27.1 26.8 29 30.2 32.2

0

10

20

30

40

50

60

70

80

90

100

1963-64 1966-67 1968-69 1969-70 1970-71 1971-72 1979 1984-85

Lowest 20% Lowest 40% Highest 20% Highest 10%

Consumer Price have been more favorable to higher income group between 1975-76 and 1986-87.

Conclusively, all three criteria outline the deterioration in income inequalities.

0

50

100

150

200

250

1975-76 1976-77 1977-78 1978-79 1979-80 1980-81 1981-82 1982-83 1993-84 1984-85 1985-86

Consumer Perice Index (general) Consumer Price Index for Food and Apparel

Rural-Urban disparities is another factor for the problem of Income Inequalities.

21.5%

49.9%

Literacy Rate

40%

80%

Access to Water Supply

10%

80%

Sewarage Facilities

6%

94%

Transport & Communication

10%

80%

Access to Electricity

20,000

8000

Population Per Bank

1538

2390

Per Capita Income

Rural

Urban

8000

28000

Numbers of Doctors

• Peoples Works Program (PWP) 1971

• Integrated Rural Development Program (IRDP) 1972-80

• Five-Point Program of the Junjeo Government 1986-88

• Village-Aid or Village Agricultural and Industrial Development Program 1953-61

• Community Development Program

• Basic Democracies 1959-70

• But, all these Programs had only touched the tips of the Iceberg of the Rural Poverty and Under-development.

• And many programs were depend on their foreign funding.

• And also Efficiency and Continuity of these Programs was also Effected by Political Influence.

Redistribution strategy is essential, involves a process, in which, the Rich soaked up to transfuse the Poor.

Government of Pakistan take measures for this via market mechanism which was insufficient to make and significant impact on Income Inequalities.

Direct Distribution measure, Land Reforms of 1959, 1972, and 1977 which only touched 10% of the Feudal, only 5% of which was distributed.

Nationalization of early 70s discourages the private investor but also breeded to Corruption and Inefficiency.

Urban Land Policies, which promoted Luxurious housing style, also gave birth to Katchi Abadis.

Imposition of progressive taxes also couldn’t make any dent toward Income Inequality and 85% of the burden fall on the weakened shoulders of the poor.

So, the fixation of the minimum wages stands out to be the final strategy for the government.

But even in this, Informal Sector raise as a barrier and a huge number of labors remain outside the orbit of Minimum Wage Legislation.

For which, in Sixth five year plan (1982-88) special emphasis was laid for the poverty alleviation and provision “Safety Nets” to the poor.

Sixth Five Year Plan Effects: Five-Point Program of JunejoGovernment (1985-88)

1. Zakat and Usher, provided

benefit of 1.2 to 2.0 million

2. Destitution

3. Nutrition for under-nutrition and pregnant Women

4. Financial allocation for social welfare organizations

5. Interest free Loans

6. Scholarships for poor Students

7. Employment generation through development of small and Cottage Industries.

8. Generation of overseas Employment

9. And others…..

1. This program specifically, designed for Poverty alleviation.

2. Construction of social and physical Infrastructure specifically in Rural Areas.

Conclusion:

All these Program were successful in eliminating Absolute Poverty, however largely failed in reducing the growing Income Inequalities.

Group Members:

• Ramsha Naz DS-10

• Maheen Arif DS-20

• Maliha Amanat DS-31

• Zainab Arif DS-41

• M. Mashood Tariq DS-34

• Sajjad Mehdi DS-24