Development of Pakistan Industry and Trade [1947-1958]

Introduction

Pakistan came into being on 14^th 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.

Discussion

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.

Conclusion

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.