PAKISTANS

ECONOMIC
GROWTH,
ECONOMIC
STRUCTURE, GOVERNANCE &
SOLUTION OF
PROBLEM

ABSTRACT:
For development nation must focus on its education because no nation can develop without
proper investing in education sector, as in case of Pakistan most of population is living
under poverty line and trend in showing increase in it instead of decline, decline in
production is also there, this article will focus on Pakistans economy from the time of
independence till to present date policies their effect and Pakistans economy as whole and
its solution.

INTRODUCTION:
An economy is the system of human activities related to the production, distribution,
exchange, and consumption of goods and services of a country or other area.
The composition of a given economy is inseparable from technological evolution,
civilization's history and social organization, as well as from Earth's geography and ecology,
e.g. eco-regions which represent different agricultural and resource extraction opportunities,
among other factors. Economy refers also to the measure of how a country or region is
progressing in terms of product.
Pakistan has total population of around 182.1 million making it 6th largest populated
country. Pakistan was a poor and predominantly agricultural country when it gained
independence in 1947. Pakistan's average economic growth rate since independence has
been higher than the average growth rate of the world economy during the period. Average
annual real GDP growth rates were 6.8% in the 1960s, 4.8% in the 1970s, and 6.5% in the
1980s. Average annual growth fell to 4.6% in the 1990s with significantly lower growth in
the second half of that decade Industrial-sector growth, including manufacturing, was also
above average.
The economy proved to be unexpectedly resilient in the face of multiple adverse events
concentrated into a four-year (19982002) period which mainly includes;

The Asian financial crisis

Economic sanctions according to Colin Powell, Pakistan was "sanctioned to the
eyeballs"
The global recession of 20012002
a severe drought the worst in Pakistan's history, lasting about four years
Heightened perceptions of risk as a result of military tensions with India with as
many as 1 million troops on the border, and predictions of impending (potentially
nuclear) war
The post-9/11 military action in neighboring Afghanistan, with a massive influx of
refugees from that country

Despite these adverse events, Pakistan's economy kept growing, and economic growth
accelerated towards the end of this period. This resilience has led to a change in perceptions
of the economy, with leading international institutions such as the IMF, World Bank, and the
ADB praising Pakistan's performance in the face of adversity.
In the late 1960s Pakistan was seen as a model of economic development around the world,
and there was much praise for its economic progression. Later, economic mismanagement
in general, and fiscally imprudent economic policies in particular, caused a large increase in
the country's public debt and led to slower growth in the 1990s.However condition improved
gradually after 2000.

STRUCTURE OF PAKISTAN'S ECONOMY:

From modest beginnings, Pakistani economy has moved successfully to a low-inflation highgrowth trajectory since 2000. The central bank has controlled inflation at around 3% per
annum in recent years - a record since 1980.Over 1,081 patent applications were filed by
non-resident Pakistanis in 2004 revealing a new-found confidence. Agriculture accounted for
about 53% of GDP in 1947. While per-capita agricultural output has grown since then, it has
been outpaced by the growth of the non-agricultural sectors, and the share of agriculture
has dropped to roughly 25% of Pakistan's economy. In recent years, the country has seen
rapid growth in industries (such as apparel, textiles, and cement) and services (such as
telecommunications, transportation, advertising, and finance Commodity producing sector)
Major Sector of Pakistans Economy:
Pakistans economy is divided into two divisions

Primary
Secondary

PRIMARY SECTOR:
Primary Sector includes Agriculture and mining. The most important crops are wheat,
sugarcane, cotton, and rice, which together account for more than 75% of the value of total
crop output. Pakistan's largest food crop is wheat. In 2005, Pakistan produced 21,591,400
metric tons of wheat, more than all of Africa (20,304,585 metric tons) and nearly as much
as all of South America (24,557,784 metric tons), according to the FAO. The country is
expected to harvest 47 to 64 million tons of wheat in 2015. Pakistan has also cut the use of
dangerous pesticides dramatically.
Pakistan is a net food exporter, except in occasional years when its harvest is adversely
affected by droughts. Pakistan exports rice, cotton, fish, fruits (especially Oranges and
Mangoes), and vegetables and imports vegetable oil, wheat, pulses and consumer foods.
The country is Asia's largest camel market, second-largest apricot and ghee market and
third-largest cotton, onion and milk market. The economic importance of agriculture has
declined since independence, when its share of GDP was around 53%. Following the poor
harvest of 1993, the government introduced agriculture assistance policies, including
increased support prices for many agricultural commodities and expanded availability of
agricultural credit. From 1993 to 1997, real growth in the agricultural sector averaged 5.7%
but has since declined to about 4%. Agricultural reforms, including increased wheat and
oilseed production, play a central role in the government's economic reform package.
Majority of the population is directly or indirectly dependent on this sector. It contributes
about 25 percent of Gross Domestic Product (GDP) and accounts for half of employed labor
force and is the largest source of foreign exchange earnings.

MINING:
Pakistan is endowed with significant mineral resources and is emerging as a very promising
area for prospecting/exploration for mineral deposits. Based on available information, the
country's more than 6,00,000 km of outcrops area demonstrates varied geological
potential for metallic and non-metallic
metallic mineral deposits. Except oil, gas and nuclear minerals
regulated at federal level, minerals are a provincial subject, under the constitution of the
Islamic Republic of Pakistan. Provincial governments are responsible for development and
exploitation of minerals, besides, enforcing regulatory
regulatory regime. In line with the constitutional
framework the federal and provincial governments have jointly set out Pakistan's first
National Mineral Policy in 1995, duly implemented by the provinces, providing appropriate
institutional and regulatory framework
framework and equitable and internationally competitive fiscal
regime.
In the recent past, exploration by government agencies as well as by multinational mining
companies presents ample evidence of the occurrences of sizeable minerals deposits.
Recent discoveries of a thick oxidized zone underlain by sulphide zones in the shield area of
the Punjab province, covered by thick alluvial cover have opened new vistas for metallic
minerals exploration. Pakistan has a large base for industrial minerals. The discovery of c
coal
deposits having over 175 billion tones of reserves at Thar in the Sindh province has given
an impetus to develop it as an alternate source of energy. There is vast potential for
precious and dimension stones.
The enforcement of Mineral Policy (1995) has
has paved the way to expand mining sector
activities and attract international investment in this sector. International mining companies
have responded favorably to the NMP and presently at least four are engaged in mineral
projects development.
Currently about
out 52 minerals are under exploitation although on small scale. The major
production is of coal, rock salt and other industrial and construction minerals. The current
contribution of the mineral sector to the GDP is about 0.5% and likely to increase
considerably
erably on the development and commercial exploitation of Saindak & Reco Diq copper

and gold deposits (world's largest gold mine), Duddar zinc lead, Thar coal and gemstone
deposits.

SECONDARY SECTOR OF PAKISTANS ECONOMY:

Industry is the secondary sector of Pakistans Economy details is as under

MANUFACTURING BY PROVINCE
Pakistan's industrial sector accounts for about 24% of GDP. Cotton textile production and
apparel manufacturing are Pakistan's largest industries, accounting for about 66% of the
merchandise exports and almost 40% of the employed labour force. Other major industries
include cement, fertilizer, edible oil, sugar, steel, tobacco, chemicals, machinery, and food
processing. The government is privatizing large-scale industrial units, and the public sector
accounts for a shrinking proportion of industrial output, while growth in overall industrial
output (including the private sector) has accelerated. Government policies aim to diversify
the country's industrial base and bolster export industries. Large Scale Manufacturing is the
fastest-growing sector in Pakistani economy
Major Industries include textiles, fertilizer, cement, oil refineries, dairy products, food
processing, beverages, construction materials, clothing, paper products and shrimp
In Pakistan SMEs have a significant contribution in the total GDP of Pakistan, according to
SMEDA and Economic survey reports, the share in the annual GDP is 40% likewise SMEs
generating significant employment opportunities for skilled workers and entrepreneurs.
Small and medium scale firms represent nearly 90% of all the enterprises in Pakistan and
employ 80% of the non-agricultural labor force. These figures indicate the potential and
further growth in this sector.
Pakistan's largest
telecommunication

corporations

are

mostly

involved

in

utilities

like

oil,

gas

and

TEXTILES
Most of the Textile Industry is established in Punjab. 10% of United States imports
regarding clothing and other form of textiles is covered by Pakistan. Textile exports in 1999
were $5.2 billion and rose to become $10.5 billion by 2007. Textile exports managed to
increase at a very decent growth of 16% in 2006. In the period July 2007 June 2008,
textile exports were US$10.62 billion. Textile exports share in total export of Pakistan has
declined from 67% in 1997 to 55% in 2008, as exports of other textile sectors grew. The
major reason of decline of textile export of Pakistan is the Govt unhealthy policies. Sui
Northern Gas Pipelines Ltd. (SNGPL) notified the textile mills to reduce the supply of gas
for five months. Head of All Pakistan Textile Mills Association of Enterprises Anis-ul-Haq has
expressed concern about the decision: "Now is the time to the textile industry out of a
three-year downturn. The demand for textile products is growing, and if we are not able to
fulfill our current orders, we will lose international buyers. "Monthly loss the textile industry
because of interruptions in gas supply could reach about U.S. $ 1 billion, or 4 $ 5 billion
for the fiscal year ending June 20 next year. The expression "industrial undertaking" has

been used in many a provision in the Income-tax Act, e.g., section 10(15)(iv )(f) and
section 80-I. There has been some controversy as regards the true import of the expression
"industrial undertaking" for the purpose of section 10(15)( iv)(f) of the Income-tax Act
relating to exemption from income-tax in respect of interest on certain foreign borrowings.
Keeping in view the legislative intent, an Explanation has been inserted at the end of section
10(15)( iv) of the Income-tax Act to define the term "industrial undertaking" for the
purpose of this provision. An industrial undertaking will mean an undertaking engaged in
the business of: manufacture or processing of goods, or generation or distribution of
electricity, or any other form of power, or mining, or construction of ships, or operation of
ships or aircraft.
As of 2010, Pakistan is one of the largest users of CNG (compressed natural gas) in the
world. Presently, more than 3,000 CNG stations are operating in the country in 99 cities and
towns, and 1000 more would be set up in the next two years. It has provided employment
to over 50,000 people in Pakistan, but the CNG industry is struggling to survive the 2013
energy crisis.

SERVICES
Pakistan's service sector accounts for about 53.3% of GDP. Transport, storage,
communications, finance, and insurance account for 24% of this sector, and wholesale and
retail trade about 30%. Pakistan is trying to promote the information industry and other
modern service industries through incentives such as long-term tax holidays.
The government is acutely conscious of the immense job growth opportunities in service
sector and has launched aggressive privatization of telecommunications, utilities and
banking despite union unrest.

COMMUNICATION
After the deregulation of the telecommunication industry, the sector has seen an
exponential growth. Pakistan Telecommunication Company Ltd has emerged as a successful
Forbes 2000 conglomerate with over US $1 billion in sales in 2005. The mobile telephone
market has exploded fourteen-fold since 2000 to reach a subscriber base of 91 million users
in 2008, one of the highest mobile teledensities in the entire world. In addition, there are
over 6 million landlines in the country with 100% fibre-optic network and coverage via WLL
in even the remotest areas. As a result, Pakistan won the prestigious Government
Leadership award of GSM Association in 2006.
The contribution of the telecom sector to the national exchequer increased to Rs 110 billion
in the year-end 200708 on account of the general sales tax, activation charges and other
steps as compared to Rs 100 billion in the year-end 200607.The World Bank estimates that
it takes about 3 days to get a phone connection in Pakistan. In Pakistan, the following are
the top mobile phone operators:
Mobilink (Parent: Orascom Telecom Holding, Egypt)
Ufone (Parent: PTCL (Etisalat), Pakistan/UAE)
Telenor (Parent: Telenor, Norway)

Warid (Parent: Abu Dhabi Group / SingTel, UAE/Singapore) [ Currently Merged with
Moblink]
Zong (Parent: China Mobile, China)
By March 2009, Pakistan had 91 million mobile subscribers 25 million more subscribers
than reported in the same period in 2008. In addition to the 3.1 million fixed lines, while as
many as 2.4 million are using Wireless Local Loop connections. Sony Ericsson, Nokia and
Motorola along with Samsung and LG remain the most popular brands among customers.
Pakistan is on the verge of a telecom revolution and is by far the most attractive sector in
Pakistan in terms of Foreign Direct Investment coming into the country. Since liberalization,
over the past four years, the Pakistani telecom sector has attracted more than $9 billion in
foreign investments. During 200708, the Pakistani communication sector alone received
$1.62 billion in Foreign Direct Investment (FDI) about 30% of the countrys total foreign
direct investment.
Present growth of state-of-the-art infrastructures in the telecoms sector during the last four
years has been the result of the PTA's vision and implementation of the deregulation policy.
Paging and mobile (cellular) telephones were adopted early and freely. Cellular phones and
the Internet were adopted through a rather laissez-faire policy with a proliferation of private
service providers that led to the fast adoption. With a rapid increase in the number of
Internet users and ISPs, and a large English-speaking population, Pakistani society has seen
an unparalleled revolution in communications.
According to the PC World, a total of 6.37 billion text messages were sent through Acision
messaging systems across Asia Pacific over the 2008/2009 Christmas and New Year period.
Pakistan was amongst the top five ranker with one of the highest SMS traffic with 763
million messages.
Pakistan is ranked 4th in terms of broadband Internet growth in the world, as the subscriber
base of broadband Internet has been increasing rapidly. The rankings are released by Point
Topic Global broadband analysis, a global research centre.
Pakistan has more than 20 million Internet users in 2009.The country is said to have a
potential to absorb up to 50 million mobile phone Internet users in the next 5 years thus a
potential of nearly 1 million connections per month.
Almost all of the main government departments, organizations and institutions have their
own websites.
The use of search engines and instant messaging services is also booming. Pakistanis are
some of the most ardent chatters on the Internet, communicating with users all over the
world. Recent years have seen a huge increase in the use of online marriage services, for
example, leading to a major re-alignment of the tradition of arranged marriages.
As of 2007 there were six cell phone companies operating in the country with nearly 90
million mobile phone users in the country.
There were 140 million mobile phone users in Pakistan in 2014, eighth largest in the world.

Wireless local loop and the landline telephony sector has also been liberalized and private
sector has entered thus increasing the teledensity rate. In mid-2008, the Local Loop
installed capacity reached around 5.5 million.
Telecom industry created of 80,000 jobs directly and 500,000 jobs indirectly.
The Federal Bureau of Statistics provisionally valued this sector at Rs.982,353 million in
2005 thus registering over 91% growth since 2000.

TRANSPORTATION
Pakistan International Airlines, the flagship airline of Pakistan's civil aviation industry, has
turnover exceeding $25 billion in 2015.The government announced a new shipping policy in
2006 permitting banks and financial institutions to mortgage ships.Private sector airlines in
Pakistan include Airblue, which serves the main cities within Pakistan in addition to
destinations in the Gulf and Manchester in the United Kingdom. The other private carrier is
Shaheen Air International whose network covers the main cities of Pakistan and the Gulf.
A massive rehabilitation plan worth $1 billion over five years for Pakistan Railways has been
announced by the government in 2005. A new rail link trial has been established from
Islamabad to Istanbul, via the Iranian cities of Zahedan, Kerman and Tehran. It is expected
to promote trade, tourism, especially for exports destined for Europe (as Turkey is part of
Europe and Asia).

FINANCE
Pakistan's banking sector has remained remarkably strong and resilient during the world
financial crisis in 200809, a feature which has served to attract a substantial amount of
FDI in the sector. Stress tests conducted on June 2008 data indicate that the large banks
are relatively robust, with the medium and small-sized banks positioning themselves in
niche markets. Banking sector turned profitable in 2002. Their profits continued to rise for
the next five years and peaked to Rs 84.1 ($1.1 billion) billion in 2006.
The credit card market continued its strong growth with sales crossing the 1 million mark in
mid-2005. Since 2000 Pakistani banks have begun aggressive marketing of consumer
finance to the emerging middle class, allowing for a consumption boom (more than a 7month waiting list for certain car models) as well as a construction bonanza.
The Federal Bureau of Statistics provisionally valued this sector at Rs.311,741 million in
2005 thus registering over 166% growth since 2000.

HOUSING
Houses in Bahria Town are the largest private housing society in Asia. The property sector
has expanded twenty-threefold since 2001, particularly in metropolises like Lahore.
Nevertheless, the Karachi Chamber of Commerce and Industry estimated in late 2006 that
the overall production of housing units in Pakistan has to be increased to 0.5 million units
annually to address 6.1 million backlog of housing in Pakistan for meeting the housing

shortfall in next 20 years. The report noted that the present housing stock is also rapidly
aging and an estimate suggests that more than 50% of stock is over 50 years old. It is also
estimated that 50% of the urban population now lives in slums and squatter settlements.
The report said that meeting the backlog in housing, besides replacement of out-lived
housing units, is beyond the financial resources of the government. This necessitates
putting in place a framework to facilitate financing in the formal private sector and mobilize
non-government resources for a market-based housing finance system.
The Federal Bureau of Statistics provisionally valued this sector at Rs.185, 376 million in
2005 thus registering over 49% growth since 2000.

MINOR SECTORS
The Federal Bureau of Statistics provisionally valued this sector at Rs.389,545 million in
2005 thus registering over 65% growth since 2000.The Federal Bureau of Statistics
provisionally valued this sector at Rs.631,229 million in 2005 thus registering over 78%
growth since 2000. The Federal Bureau of Statistics provisionally valued this sector at
Rs.1,358,309 million in 2005 thus registering over 96% growth since 2000. The wholesale
and retail trade is the largest sub-sector of the services. Its share in the overall services
sector is estimated at 31.5 percent. The wholesale and retail trade sector is based on the
margins taken by traders on the transaction of commodities traded. In 201213, this sector
grew at 2.5 percent as compared to 1.7 percent in the last year.

ENERGY
For years, the matter of balancing Pakistan's supply against the demand for electricity has
remained a largely unresolved matter. Pakistan faces a significant challenge in revamping
its network responsible for the supply of electricity. While the government claims credit for
overseeing a turnaround in the economy through a comprehensive recovery, it has just
failed to oversee a similar improvement in the quality of the network for electricity supply.
Most cities in Pakistan receive substantial sunlight throughout the year, which would
suggest good conditions for investment in solar energy. If the rich people in Pakistan are
shifted to solar energy that they should be forced to purchase solar panels, the shortfall can
be controlled. This will make the economy boost again as before 2007. Economic growth in
Pakistan leads to electricity consumption but not vice versa.

DEVELOPMENT IN PAKISTAN 1958- TILL TODAY:

Pakistan was seen as a model of economic development around the world, and there was
much praise for its economic progression. The capital Karachi was seen as an economic role
model around the world, and there was much praise for the way its economy was
progressing. Many countries sought to emulate Pakistan's economic planning strategy and
one of them, South Korea, copied the city's second "Five-Year Plan"; the World Financial
Centre in Seoul is modeled after Karachi. In this era Pakistan got its first Automobile
industry, as well as land reforms were also took place there was also effect of green
revolution and tax concession which cause industries to set up in province of Punjab,
manufacturing sector has contributed around 8.3% in countries GDP private Tube wells

were also install to support farmers that increase production in agriculture sector which
causes GDP growth rate to exceed by 6% but this doesnt cause development as whole
because development doesnt make pace with rural population increase. East Pakistan was
dependent on imports that results in balance of payment problem. In 1970 Government of
Pakistan starts Nationalization Program in order to prevent any further division and to have
effective control on countys economy during 1970-1980 government had complete control
over almost all corporations of Country including KESC, Heavy Mechanical Complex and
Steel Mill and Port Qasim was also set up in this era but GDP growth rate declined because
of adverse effect of Socialist policies and oil crises. The completion of the long gestation
period Tarbela Dam helped unleash an unprecedented agricultural growth, while fertilizer
and cement investments undertaken under Bhuttos government contributed to the
industrial growth. Tremendous boost to economic activity was provided by rising worker
remittances, which rose to a peak of US $3 billion in 1982-83. In 1982-83, these
remittances were equivalent to 10% of the gross national product of Pakistan. During
1980s government of Pakistan successfully negotiated with USA for larger external
assistance, unprecedented in the history of Pakistan. In addition to direct assistance to
Pakistan, the United States and allies funneled about US $57 billion to the Afghan
Mujahedins through Pakistan, providing further boost to the local economy. Similarly, the
narcotic trade which gathered momentum in the 1980s strongly supported the service
sector of the economy. The economic policies became market oriented. Buoyant remittances
and aid eased the foreign exchange constraints on the economy. During 1993-1998
economy of Pakistan had saw many ups and down because of Political instability, Financial
crisis in Asia and increase in defense budget. After words in 2000 Pakistan first time in the
history revenue collection were met in time and development was increased by 38% mostly
because of the Aid given by USA as collation support fund in war Against terror , although
reserves starts increasing, financial markets were more stable than past, inflation rate were
dropped to 3.5% but this starts declining after 2008 because of no sustainable economic
policy and other factors such as Terrorism because of which it was estimated that around
40% of population were become in poverty line, suicide ratio increases the main reason for
this stagflation was no coordination in between fiscal and monetary policy.
In present days Pakistan is facing economy crippled with many challenges including energy
shortages, hyperinflation, mild economic growth, high debt and large budget deficit, $6.6
billion loan from the International Monetary Fund is provided to government t avoid a
balance-of-payments crisis. Lower oil prices, higher remittances and increased consumer
spending are pushing growth toward a seven-year high of 4.3 percent in the fiscal year of
FY2014-15.
Pakistan's GDP growth rate for FY 2012-2013 was down to 3.59% with estimates suggesting
that it will only reach 3.65% by the end of 2013 however the government expects to
increase it to 5.8% for FY 2014-2015. Business confidence in Pakistan is at a three-year
high in May 2014 largely backed by increasing foreign reserves to $10b while it is expected
that they will cross $15 billion by mid-2014. Along with that, in May 2014 IMF claimed that
Inflation has dropped to 13 per cent compared to 25% in 2008, foreign reserves are in a
better position and the current account deficit has come down to 3 per cent of GDP for
2014.

IS DEVELOPMENT IN PAKISTAN IS QUESTION MARK?

Pakistan has one of largest human resource potential in world, also has one of the largest
irrigation system of world, Land with most of resources but development isnt made so far it
had to be made by now. More than 40 % people with in the country are living their lives
below the poverty line on average they are earning less than 125 RS, the cost of petrol is
increasing day by day which affects the rate of other prices as well.

POVERTY IN PAKISTAN
The wealth distribution in Pakistan is presenting a situation where one family looking for
new BMW, while another family looking for one time meal. Poverty in Pakistan is increasing
day by day, and because of poverty and hunger more than thousands of people commit
suicide with their families.

POVERTY RATIO IN P ROVINCES

In 21st century Pakistan faces serious issue which lead in increasing of Poverty level, issue
of 9/11, then Earth quake in 2005 effect million of people, two continuous floods in the year
of 2010 and 2011 contribute a lot in increasing poverty in Pakistan.
SDPIs study on poverty in Pakistan revealed that every third Pakistani is living his life below
the poverty line. Baluchistan which is considered as the land of mineral is facing a serious
issue of poverty, 52 % of total population in Baluchistan living below the poverty line, 33 %
of sindh population are living below the poverty line followed by KPK having 32 % ratio.
Punjab which is considered as the urban area also has 19 % population which living below
the poverty line.

CAUSES OF POVERTY IN PAKISTAN:

The main causes for poverty in Pakistan are as under:

Low literacy rate

Instable political and law and order situation
Less or no availability of health facilities
Power shortage and unemployment
High inflation
Inequality and natural disasters
Corruption

SOLUTION OF PROBLEM:
Education has direct impact on economic development sometimes non-direct as well,
education is the first step in way of development and it also provide basis for socioeconomic condition for country it is also considered as one of the most important tool to
reduce poverty mostly the one who are poor or living below poverty are not able to send
their children to private educational institutes that results in child labor increase on the
other hand governmental educational institutes are widening up the gap between poor and

richer by providing low quality education, it is also observed that human capital is only
developed through savings and than making investments in health sector but unfortunately
because of low literacy rate and high drop out ratio at secondary educational level majority
population is less literate that spend more and saves less because of which they are still in
poverty line.
Agriculture sector of Pakistan employees around 40% of labor force, most of farmers arent
familiar with latest available technology either because dont have it or have no idea about
it although educating farmers will increase total agriculture production of Pakistan as well as
it will also enhance quality of product and remaining 60% uncultivated land could also
become cultivatable land. This will apparently increase countrys total GDP as well as will
also increase human development.

References:
http://www.pbs.gov.pk/
http://www.tradingeconomics.com/pakistan/indicators