Hamza Hussain Wyne

IRP – Pakistan from Agricultural To Industrial State Theme Agriculture holds great importance for Pakistan due to the presence of Rivers in the Land , originating from North (Kashmir) & terminating in the South (Karachi) becoming part of Arabian Sea. From the Start, Pakistan had large potential of agriculture & at the time of creation Pakistan was mainly agricultural centered country. But with the passage of time Pakistan transformed into more diversified country as industrialization took place. Globally, Pakistan having a status of semi-industrialized country with heavy dependence on agriculture sector. Industrialization can be described as the age of social & economic change that molds a country from agrarian society to an industrial one. The Role of Agriculture in the economic development cannot be negated. Aim of this research paper is to analyze proper channels & means to merge Industry into Agriculture in a way which benefits both departments. Lt HAMZA 313 AEB Table of Contents CHAPTER - ONE 1.Intro 2.Aim CHAPTER – TWO PART - 1 1.Economic Sector Since 1947 a.Economic Background (1) First Five Decades (2) Present Era b.Industrialization (1) Pakistan’s Position (2) Previous Research c.Role of Industry (1) Major Industries (2) GDP Contribution (3) Comparison With other Countries PART - 2 2.Pakistan an Agrarian State a. Own Capability (1) Resources (2) Ranking in the Economic World b.Power Resources (1) Hydro Electricity (2) Thermal Energy (3) Solar Energy (4) Advanced Sources c.Agriculture-Industry as an Economic Contributor (1) Boosting GDP of the Economy (2) Foreign Exchange Earner (3) Marketable Supernumerary (4) Assisting of Industries (5) Raw Material for Industrial Sector CHAPTER -THREE 3.Analysis CHAPTER -FOUR 4.Recommendation 5.Conclusion 6.Bibliography CHAPTER – ONE Intro 1.In the start of the 19th century, England experienced a phenomenon, which forever transformedthe world’s economic position. This event, which swept through the western world altering everything in its path, was the Industrial Revolution, and since its initiation, economists and governmental policy makers alike have affiliated economic growth with industrialization. According to many, economic development is not only supported by industrialization, but characterized by it. In a former World Bank publication, development is described as ‘a new telephone exchange in Addis Ababa; a machine shop in Thailand; a pasteurization plant in Ceylon’ (Heilbronn, 1966). 2. This coalition of growth and industry has not happened randomly. The expansion of large-scale industry not only adds the private sector’s portability, but also amplifies the productive efficacy of an entire nation by increasing the amount of goods that can be produced from a given set of capital. Not only does the course of industrialization allow a nation to better meet its domestic needs, but when plenty of manufactured goods are exported, the positive externalities generated by trade are also increased (Khan, 1993). In addition, the industrial sector often soaks in excess labor, thus boosting the middle-income population base of a nation. Aim 3.To analyze the relationship between Pakistan’s industrial and agricultural sectors in order to maximize the economy. CHAPTER – TWO PART-1 Agricultural Sector Since 1947 1.Economic Background a.Pakistan’s Economy is the 26th largest in the world in course of purchasing power parity (PPP), and 44th largest in course of nominal GDP even though the country is 6th most populous in the world. As Pakistan has a population of over 186 million (world's 6th-largest), thus GDP per capita is $3,149 ranking us 140th in the world. The economy of Pakistan is semi-industrialized, with axis of growth along the Indus River. Leading export commodities include textiles, leather goods, sports goods, chemicals and carpets and Rugs. 2.First Five Decades a.Pakistan was a very broke and in general an agricultural state when it gained independence in 1947. Pakistan's average economic growth rate in the first five decades -) has been more than the growth rate of the world economy during the same era. Average rates of annual real GDP growth were 6.8% in 1960s, 4.8% in 1970s, and 6.5% in 1980s. Average annual growth deprived to 4.6% in the 1990s with a substantial lower growth in the second half of that decade. Please note that with a GDP growth rate of 6.8% during the 1960s, Pakistan was seen as a model of economic development around the world there was much praise for the way its economy was progressing. Later, economic mismanagement in general, and imprudent economic policies in particular, caused a large increase in the country's public debt and led to slower growth in the 1970s and 1990s. 3.Present Era a.This is a chart of trend of gross domestic product of Pakistan at market prices estimated by the International Monetary Fund with figures in millions of Pakistani Rupees. Year Gross Domestic Product US Dollar Exchange Inflation Index (2000=100) Per Capita Income (as % of USA) 1960 20,058 4.76 Pakistani Rupees -,740 4.76 Pakistani Rupees -,355 4.76 Pakistani Rupees -,330 9.91 Pakistani Rupees -,460 9.97 Pakistani Rupees-,- Pakistani Rupees-,029,- Pakistani Rupees-,268,- Pakistani Rupees-,826,- Pakistani Rupees-,581,- Pakistani Rupees 126 1.71 4.Industrialization a.Industrialization is a process in which a society or country transforms itself from a primarily agricultural society into one based on manufacturing of goods and services. In which manual labor is replaced by mechanized mass production and craftsmen are replaced by assembly lines. This term is associated with the European industrial revolution of the late 18th and early 19th century. 5.Pakistan’s Position a.In 1995, Pakistan’s per capita income was US$460 (2,230 International dollars, converted using the purchasing power parity), which termed it asa low-income nation by World Bank standards. Despite the low level of per capita income;GDP growth rate has been impressive. With an annualGDP growth rate of 4.6% during the- era, Pakistan hopes to surpass the GDPlevel of US $766 (World Bank, 1997).In terms of economic development, both agricultural and industrial sectors have played major roles.In 1995 (the most recent year for which economicdata are available), the industrial (includes manufacturing) and agricultural sectors accounted for 24 and26% of the overall GDP, respectively (World Bank, 1997. In terms of employment, the industrial and manufacturing sectors accounted for 10.9%of total employment, while agricultural sector employed 46.5% (United Nations, 1997). In spite of the significance of agriculture, Pakistan has pursued a consistent policy directed at industrial development in its attempts to increase its per capita income. 6.Previous Research a.Previous research on interaction between agriculture and industry has been limited. In a theoretical analysis of agriculture’s role in structural transformation of underdeveloped nations, Johnston and Killby (1975) examined some of the traits of agricultural/industrial interaction. It was hypothesized that one of the major roadblocks to industrial expansion in underdeveloped nations relates directly to the relationship between agriculture and industry. According to this hypothesis, inequalities in agricultural income distribution concentrate a majority of the rural buying power in the hands of a few large landholders. This causes a disproportionate rural demand for high-value, capital-intensive goods. As underdeveloped nations possess the capabilities to produce labor-intensive products more efficiently than capital-intensive ones, In a country like Pakistan (where there exists a large rural demand for high-value products) results in the development of inefficient industries for the production of capital-intensive manufactured goods for the domestic market. These goods have difficulty competing with imports, and are profitable only due to government policies which create favorable price distortions for the industry. 7.Role of Industry a. “Industry refers to that sector of economy which is related with manufacturing and production of major products.” b.Pakistan ranks as number 43-44 among the countries of the world in nominal GDP, 26th in GDP with purchasing power parity and 55th in the world in factory output. Agriculture provides food, fiber, and raw material for industry, and benefits in turn as industry helps modernize traditional production techniques by providing modern input, technology, and improved managerial skills. 8.Major industries a.Some major industries include textile, telecom, cement, fertilizer, edible oil, sugar, steel, tobacco, chemicals, machinery and food processing. Some Prominent ones are discussed as under:- (1)Textile Industry: (a)Cotton as well as cotton based products are a major contributors to foreign exchange which ae 61% in Export. This makes it the 3rd largest exporter in the world. Over 1.3 million farmers are involved in the cultivation of this crop. Provides employment to 6.2 Million and contributes 8.5% in the GDP. Scarfs, winter shawls, wool fabrics, blankets etc. are the products of textile. (2)Sugar industry: (a)At the time of independence 1947 in Pakistan there were only two sugar mills. At present there are 106 mills are operating in Pakistan. It is 2nd largest industry after textile and 15th in the world. GDP contribution is 0.7% and employment is 1 million. (3)Cement Industry: (a)Cement industry contributes 3.5% in the GDP. Pakistan is ranked 5th among the world exporters of cement. There are 23 companies in total , out of which 4 are in foreign and 3 controlled by the Armed forces. (4)Fertilizer Industry: (a)Contribution of fertilizers is 14% in the GDP. Employment is 4.7 million in the industry. Major products are Urea, DAP, NP, CAN & SSP. Major fertilizer corporation in Pakistan are Fauji Fertilizer &Engro chemicals. (5)GDP Contribution: (a)Agriculture – 20.47% i.Crops – 9.90% ii.Livestock- 9.97% iii.Fishery-0.33% iv.Forestry-0.25% (b)Industry- 23.93% i.Manufacturing – 17.53% ii.Mining – 2.39% iii.Construction – 2.19 iv.Electricity & Gas – 1.80% (c)Services–55.60% i.Wholesale & trade – 17.25% ii.Transport – 11.80% iii.Finance & Insurance – 3.59% iv.Ownership & Dwelling – 2.22% v.Public Administration & Defense – 5.4% vi.Community & Social Professional Services – 10.22% (6)Comparison with other Countries in the region: (a)Keeping in view the Industrial Sector i.Pakistan – 23.93% ii.India – 26.3% iii.Bangladesh – 28.5% iv.China – 46.9% PART-2 Pakistan as an Agrarian State: 1.Pakistan is basically an agricultural economy. About 70 percent of the masses in the country are directly or indirectly linked to agricultural occupation. Agriculture in Pakistan engrosses about 45 % of the country’s labor force. In accordance with the economic survey, share is agriculture in GDP is 21%. With improvement in technology and modern trends, agrarian economy is moving towards industrialization. Own Capability 2.Agriculture in Pakistan compliments many factors, which are natural, geographical and social. The climate of Pakistan in general is contributive to crop growth and development. Most of the areas of Pakistan receive appreciable sunlight. The most important factor in agriculture in Pakistan is the network of canals. Although Pakistan does not has optimal availability of water. There are lapsesBut the network of canals is best in the world. One of the most prevalent canal systems can be found in Pakistan. This canal system is the source of water to far off places. Dams, barrages, link canals, headwork all make up substantial water for requisite crop production. Resources 3.Stable crop in Pakistan is wheat. It is grown in both irrigated and rain fed areas of the country. Wheat production in Pakistan has increased due to the introduction of new varieties and better fertility treatments. 4.Pakistan is among the major rice producing countries of the world. The best quality of rice all around the globe is produced in Pakistan. Rice has peculiar aroma and taste. Rice export is a major contributing hand to Agriculture in Pakistan. Lot of foreign exchange is earned through it. 5.Cotton production is also great in Pakistan. Pakistan’s largest industry is textile industry. Textile and cotton products are exported to many countries. 6.Sugarcane is produced in abundance in Pakistan. But it mostly fulfills the domestic needs. More than 90 sugar industries work in Pakistan. 7.Pakistan is among the top producers of gram and peaches. 8.Citrus fruits of Pakistan have high demand in international market. Similarly mango varieties grown in Pakistan also stand high among worldwide mango produce. 9.Livestock and animal husbandry is a major part of Agriculture in Pakistan. The Neeli Ravi breed of Buffalo is considered best in the world. Milk production in Pakistan is 5th largest in the world. Similarly one the world’s largest milk processing plant is working in Pakistan under Nestlé Ltd. 10.Forestry and forest products of Pakistan are not produced in that much high amount. But still forestry has a share in agriculture in Pakistan. 11.Ranking in the Economic World a.Pakistan is one of the world's largest producers and suppliers of the following according to the different authorities i.e. Food and Agriculture Organization of The United Nations and FAOSTAT given here with ranking: (1) Chickpea (3rd) (2) Apricot (6th) (3) Cotton (4th) (4) Milk (5th) (5) Date Palm (5th) (6) Sugarcane (5th) (7) Onion (7th) (8) Kinnow, mandarin oranges(6th) (9) Mango (4th) (10) Wheat (7th) (11) Rice (4th) b.Pakistan ranks 8th worldwide in farm yield, according to the List of countries by GDP sector composition. 12.Power Resources a.Pakistan is graced with rivers & dams, minerals & suitable climatic conditions. It is blessed with all four seasons. With proper utilization of the present resources and economic modeling, large lapses and deficits in today’s economy of the country can be improved upon in very less time. b.Hydro Electricity (1)Nature has given us suitable environment in Pakistan. To generate hydroelectricity environment is better for it. The northern and north western area of Pakistan is the right place for building of dams. We can generate hydroelectricity to create steep slopes in rivers and canals. Its fit example is the Ghazi Barotha project in river Indus. Both public and private sectors have planned to exceed the production of hydroelectricity in Pakistan. Pakistan's all in all hydroelectricity production is 4963 Megawatt. Pakistan has the capacity of production of 30000 MW from its river Indus, Jehlum and Chenab. 13.Important Hydroelectricity Stations a. Tarbela Dam (1)This dam is located on Indus River. The Tarbela dam generates 70% of the total hydroelectricity production of Pakistan. Its installed generation capacity is 3478 MW. The Tarbela Dam was constructed in the year 1976 and its cost was about Rs.18 billion in total. This dam is about 9000 feet long. The Tarbela is one of the largest dams of the world. b.Mangla Dam (2)This dam is situated on Jehlum River. This dam installed generation capacity of power is 1000 MW which is 20% of total hydroelectricity of the country. This dam was constructed and completed in the year 1967 the height of this dam is 110 meters. This dam is made of concrete. This is second biggest dam in Pakistan. 14.Thermal Energy a.The Thermal power stations are producing electricity by gas, oil and coal in Pakistan. The 49.8% of the total electricity is produced by the thermal power. The thermal power production is 4921 MW in Pakistan. There are 13 thermal power stations operating in Pakistan. The biggest station is operating in Karachi this station generates 1756 MW. The second biggest station is operating in Multan. It generates 260 MW. Other significant thermal plants are in Faisalabad, Kotri, Pasni, Guddu, Jamshoro, Muzaffargarh, Sukkur and Larkana etc. b.Solar Energy (1)The energy that we get from sun is known as solar energy. The climate of Pakistan is extremely hot and dry. Pakistan is located near the Tropic of cancer so the sun rays are vertical most of the year. These days are hot, that’s why the season of summer precedes the winter in Pakistan. We can use this energy to the maximum in our daily life. This is the cheapest source of energy. (2)Uses of Solar Energy (a)We have abundance of this energy but important thing is the maximum utilization of it. This energy is used to operate small machines and motor in future the solar energy will become the biggest source of energy of the world because other sources are expensive and difficult to exploit. 15.Advanced Sources a.Atomic Energy (1)Atomic energy is the most advance source of this world. Although this source of energy is very sophisticated and multi-disciplinary system. As the fast growth of population sources are also increasing at similar rate. That's why it is a vital source of energy in developing countries. b.Nuclear Power Technology (1)Nuclear Power technology was introduced in Pakistan in 1971 when a plant of 136 MW capacity. Nuclear power plant (KANUPP) was installed. This plant has been working safely for more than 31 years. Cheshma nuclear power project is also working with the support of China. This has been channeled to the national grid on June 13 2000. It has a gross capacity of 325 MW and is located near Cheshma Barrage on left bank of river Indus. c.Agriculture-Industry as an Economic Contributor (1)Agriculture plays an significant role in Pakistan's economy being an agrarian state but on the same end importance of Industry can’t be negated, making for about 25 percent of GDP and half of the country's labor force. Agricultural yield has increased at an average annual rate of over 4 percent in the past 2 decades, contributing generally in overall economic growth, food supplies and nutrition and exports. The contribution of agriculture in the economic development of Pakistan is as under: d.Boosting GDP of the Economy (1)Agricultural& Industrial sector of Pakistan has made vital contribution to its GDP. When the GDP of a country prospers, economic development takes place. In the start agricultural sector had highest share in the GDP but then the service sector became the chief provider with time. Fisheries and livestock are important foundation of employment besides they also help in increasing GDP and contain exports of the nation. Livestock holds 9% of the total GDP and 4% of the agricultural sector. e.Foreign Exchange Earner (1)The agriculture along with industrial sector holds major authorities of foreign exchange incomes in Pakistan. The export of sugar, rice, cotton etc. bring about 65% of our total earnings. The imports supports in inputs for development i.e. import of equipment, capital machinery, technical know-how etc. f.Marketable Supernumerary (1)When on systematic lines the agriculture sector is supplemented, it produces captivating marketable surplus. The surplus i.e. sugar, fish, cotton, silk, timber, jute, wheat etc. can help to pay the capital tools, import of raw materials and technology. This helps in bringing about rapid economic development. g.Assistance of Industries (1)The winsome growth in the agricultural area provides raw materials to manufacturing productions. The production of fruits, jute, cotton, sugarcane etc. supports other agro-based industries to get material from within the state and boost up the framework. h.Raw Material for Industrial Sector (1)In the economic development of any state industries of are great value. As long as agriculture is providing raw materials to the industries, it is assisting many industries in Pakistan. Cotton which is also a very important export of Pakistan and raw material of textile industry is a vital crop of Pakistan. As sugarcane is also amongst one of major crops of Pakistan and similarly sugar industry uses sugarcane as raw materials. Pakistan’s sports goods are well known in the world and are also large exports for Pakistan. Livestock which also supports in making the raw materials of these sports items. All these assistance of industrialization are greatly resulted from agriculture sector of Pakistan which boosts up the economic development of the nation. CHAPTER – THREE ANALYSIS 1.It reveals the following: a. Power Shortage & Energy Crisis has sent the country back in the Dark Ages b. Cruddy Law & Order situation resulting in low foreign investment which doesn’t favors the economic system c. Changing Political & Economic policies are one f the sole reason for poor economic layout of Pakistan d. Lack of Products innovation resulting in concentration of industries in some specific sectors which further fades creativity e. Higher interest rate further plays it role in downfall of the GDP & national income of the country f. Inflation keeps on increasing creating more problems for the common man g. Under developed Infrastructure is a huge obstacle for the transportation sector h. Unemployment is there , which gives fuel to poverty , illiteracy , corruption & mostly damages the Economy i. Underutilization of Raw materials by the industrial sector j. Self-Reliance Policy is not adopted thereby keeping Pakistan a dependent state. CHAPTER – FOUR Recommendations Increase in Per Capita Income 1.Per capita income is the annual average income of the individuals of a nation. We derive it by dividing national income on total population. Agricultural sector provides more jobs to unemployed people. It increases the individuals as well as national income. Agricultural sector is essential to increase the PCI, which is $ 1254 at present. Major Source of Employment 2.Agriculture sector provides employment to major portion of our labor force. More than 45.0% of our labor force is directly involved in agriculture sector, while 66.7% of our rural population is dependent on agriculture. This is the major sector, which provides employment to a large portion of our population. Agriculture sector is helpful to reduce the unemployment and Poverty. Source of Forex Earning 3.Agriculture sector is the main source of foreign exchange (forex) earning which is used to import capital goods. Total forex resources of Pakistan is $ 17.1 billion out of which share of agriculture is $2007.3million. Major cash crops of Pakistan are cotton, rice, tobacco etc. that is helpful to correct the balance of payment. Source of National Income 4.At the time of partition, contribution of agriculture sector to GNP was 60%, which decreased to 29.4% in 1980-81. Now its share to GDP is 20.9% in 2010-11. Accordingly, agricultural sector is the major contributor to Pakistan’s national income. Supply of Raw Material 5.Agricultural sector provides not only food but also provides cotton, sugarcane, tobacco, rice, oil-seed, meat and milk to various agro-based, small scale and large-scale industries as a raw material. Development of Industrial Sector 6.There is inter-dependence and inter-relationship between agricultural and industrial sector, both are helpful to develop each other. Due to use of modern techniques of production in agricultural sector, when income of the agriculturists increases, they will demand for industrial articles, like threshers, harvesters, tractors, tub-wells and various other consumer goods, which results in industrial growth and development. Balance of Payment Position 7.Promotion of Industrial sector will provide surplus production for exports and our foreign exchange reserves will be increased. This will be helpful in the improvement of balance of payment. At present Pakistan is facing a deficit of $ 8.3 billion in its balance of payment. Self-Reliance Policy 8.Both sectors are helpful to achieve the self-sufficiency. Our country will not only become self-sufficient in food but supply of raw materials for industries will also expand our industrial sector. Direct Foreign Investment 9.Use of advanced technologies in farming is common in today’s world. It boost-up the industries like tractors, harvesters, thrashers, chemicals etc. It has increases the foreign direct investment in our country. It provides employments to our population and also increases the national income. Foreign investment is $ 1.8 billion in Pakistan. National Integration 10.Agriculture sector is the life-blood of our economy. Development of agricultural and industrial sector will increase the living standard of the rural population. This leads to reduce the urban and rural differences in the country. Demand for Industrial Goods 11.As the agriculture productivity increases, the income of farmers goes up. With the rise in income the demand for both agricultural goods (tractor, fertilizer, pesticides, tube-wells etc.) and industrial goods (television, mobile, computer etc.) will increase in rural areas. Balanced Growth Economy 12.There exists close inter-dependence between agricultural sector and industrial sector. Agricultural sector will develop the industrial sector also. Income received by cultivator will develop the demand for the industrial goods. Its results are in balance growth of the economy. CONCLUSION: 13.Both Agriculture and Industry had contributed in Pakistan’s development in these different ways. The government should announce policies which raise the productivity of agriculture in order to increase economic development. Government should adopt modern methods of production through the introduction of technology through industrial sector. The government should also study land reforms as the large lands are more productive than the small ones and should also increase the ownership of land to remove feudalism. Effective and advanced ways for agricultural sector will definitely enhance the development of the weak economy of Pakistan. Pakistan is shifting towards industrialization but agriculture is still a major contributor to economy.Both sectors need to function collectively so that maximum output benefits the people of nation and the nation itself. BIBLIOGRAPHY BOOKS 1.Role of Agriculture in the Economic Development of Pakistan Documents 1.by FAO Corporate Document Repository 2.Agriculture in Pakistan – Overview at www.bookhut.net Discussions 1.Case Studies with various MBA Grads of LSE( Lahore School of Economics ) 2.KullapaprukPiewthongngam( Faculty Member of Khonkaen University ) Web Sites 1.en.wikipedia.org/wiki 2.www.academia.edu 3.www.pkhope.com 4.www.scribd.com 5.www.faostat.fao.org 6.www.ahsankhaneco.blogspot.co.uk