Pakistan came
into being on 14th August 1947 with no constitution to follow. It
was the era when Pakistan faced many difficulties due to unavailability of
government structure and Industrial and Trade policies. Industrialization
between 1947 and 1958 had an objective to make its own products by using the
available raw material in the country so that Pakistan would not depend on
outside sources to meet requirement of consumer goods in home market.
Government played an important role in
the country’s industrialization program. Industrial policy 1948 stated: “The
most striking feature of Pakistan’s present economy is the marked contrast
between its vast natural resources and its extreme industrial backwardness”
— Government’s industrial policy statement issued in April 1948 (as
mentioned) emphasized particularly on manufactured goods based on domestic raw
material.
In every economy there are set of
institutions that lead to development in an economy. In case of Pakistan;
various institutions were established in late 1940s and early 1950s which
include:
— Establishment of Pakistan Industrial Finance Corporation and Asian
Development Finance Corporation in 1949 which were transformed to Industrial
Development Bank and Asian development Bank of Pakistan respectively.
Additionally, the establishment of National Bank of Pakistan in 1949 and the
formation of Industrial development Corporation in 1952; which’s focus was on
formation of industries which were handed over to the private sector.
During this era,
Institutional growth was very rapid and impressive, hence significant growth in
manufactured goods produced from newly established industries caused increase
in the production. Between 1949 and 1958 the growth rate of industry in
Pakistan was amongst the most rapid for any country in the world because of the
high growth rates as mentioned below:
- Maximum annual growth rate =28.7% (1953-1954);
- Minimum annual growth rate =4.9 % (1957-1958);
- Average annual growth=19% (1947-1958).
Following are the key Industries
followed by underlying companies; that emerged during that era:
q Tobacco, Sugar, Textile and Jute, Chemical, Fast Moving Consumer Goods
and Power Industry.
During that period, there were two Major Players in
Tobacco Industry.
- Pakistan Tobacco Company was established in 1947 and was a subsidiary of British American Tobacco Group.
- Lakson Tobacco Company Limited (Philip Morris) was established in 1954 by the Lakhanis and it was a subsidiary of Lakson Group.
Sugar industry was the fastest growing industry
during that period; due to high demand of sugar and Pakistan’s rich
agricultural environment. Sugar cane was readily available, but Punjab did not
have many sugar mills. Most of them were located in Karachi and NWFP. There
were only seven sugar mills at the time of partition; five were present in East
Pakistan and two in West Pakistan, the sugar mills of West Pakistan had a
capacity of 5000 tons annually.
- Premier Sugar Mills was founded in 1950; in Mardan, NWFP. It was the biggest sugar mill in South Asia at that time;
- Frontier Sugar Mills was incorporated in 1951; in Takht-e-Bhai, NWFP.
Other Major Sugar Mills
included:
- Layyah Sugar Mills;
- There was a sugar mill controlled by PIDC which was later overtaken by the Fauji Foundation;
- By 1956 the sugar production capacity in Pakistan increased by 9 times and was around 45,000 tons per annum.
During that time, Pakistan
was famous for its cotton and jute. Cotton production was mainly done in the
West Pakistan and Jute in the East Pakistan, but there was no industrial set up
at the time of partition. Major Evolutions came up in Textile Industry
with the big names:
- Nishat Mills Limited was the flagship company of the Nishat group founded in 1951.
- Gul Ahmed already traded textiles before partition; but in 1952 it started manufacturing fabric which was a milestone in the history of Pakistan.
- Kohinoor Textiles was founded in 1953 by Saigol Group.
East Pakistan after
partition in 1947 lacked a Jute Industry but had the finest jute fiber
stock. As the tension started to rise
between Pakistan and India, the Pakistan felt the need to setup their own Jute
Industry.
- Several groups of Pakistani families (mainly from West Pakistan) came into the jute business.
When it comes to the
Chemical Industry, Major Entrants were:
§ Kohinoor Cement founded in collaboration
between the West Pakistan Industrial Development Corporation and the government
of Canada by Saigols in 1956.
§ ICI Pakistan was set up in 1952. Its
predecessor was Khewra Soda Ash Company.
In Fast Moving Consumer
Goods, Unilever Pakistan vegetable oil factory was setup in Pakistan in 1948
at Rahim Yar Khan.
Following are some Macroeconomic
Forces that influenced the development:
— The
firm decision not to devalue rupee value unlike other currencies
— The
Korean War (1950) and the increasing demand of commodities
— Control on Imports to improve the balance of
Payments
An essential component of the trade and industry
that, directly and indirectly, had an impact on the scenario as whole is the
trade policies. To stop the balance of payment from going into negative,
imports were controlled. This was done by placing tariffs on imports. Not only
did this prevent the balance of payment from going into negative, it also
contributed towards the protection of the local industries from international
competition.
Balance of Payments in the Period (Shown in $
millions)
Year
|
Exports
|
Imports
|
Balance
|
1950-1951
|
408
|
353
|
53
|
1951-1952
|
279
|
445
|
-166
|
1952-1953
|
262
|
307
|
-45
|
1953-1954
|
194
|
249
|
-55
|
1954-1955
|
149
|
237
|
-88
|
1955-1956
|
156
|
203
|
-47
|
1956-1957
|
147
|
319
|
-172
|
1957-1958
|
91
|
276
|
-185
|
East Pakistan
was a 75% contributor towards the jute production, whereas West Pakistan was
proficient in cotton production. To capitalize on the export of these two
commodities export tax was levied on them. This tax contributed to the national
tax collection and proved the imposition of the tax a wise decision. Where we
had an edge in the international market was the overvaluation of the Pakistani
rupee relative to the other currencies. This meant that we had a respectable
exchange rate and that gave us a good place to bargain from.
At partition, economy of Pakistan was
un-industrialized and was based on agriculture and food production. During
1947-1958, with the introduction multinational companies along with support of
few families played a key role in the development of our economy.
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