THE UNIVERSITY OF LAHORE

Large, small and cottage industries of Pakistan

Growth and impact analysis report
Waqas Mehmood BS.O3

2011

ECONOMICS

OF

PAKISTAN

Large scale industries:

Pakistan, which had almost no large industrial units at the time of partition in 1947, now has a fairly broad industrial base and manufacturing accounts for about 24 percent of GDPA. Cotton textile production is the single most important industry, accounting for about 19 percent of large-scale industrial employment. Cotton yarn, Cotton cloth, Made-up textiles, Ready-made garments and knitwear collectively accounted for nearly 60 percent of Pakistan's exports in 1999-2000. Other important industries are:

1.

Cement

The cement industry of Pakistan entered the export markets a few years back, and has established its reputation as a good quality product. The last few years have been a golden period for cement manufacturers, when the government increased spending on infrastructure development.

Analysis of cement in financial years

During the financial year-06Cement sales registered a growth of 13.5

million tones sold in FY 2006 year.

During the financial year-07Cement sales increase by 31 percent to 17.53

million tones
During July-February-08 Cement sales showed an increase, both in

domestic and regional markets to 18.17 million tones.

 The domestic sales registered an increase of 7.2 percent to 14.4

million tones and exports stood at 3.7 million tones as against, showing an increase of 110 percent. The cement sector is contributing Rs 30 billion to the national exchequer in the form of taxes. There are four foreign companies, three armed forces companies and 16 private companies listed in the stock exchanges. The northern region has over 87 percent share in total cement dispatches while the units based in the southern region contributes 13 percent to the annual cement sales.
Demand of cement in Pakistan last few years

The cement demand grew 19 percent and 13 percent during FY05 and FY06 respectively. During FY07-08, production increased by 30 percent as compared to last year. The demand for cement was forecasted to grow by 26 percent during FY07 and 17 percent in FY08. The per capita consumption of cement has risen from 117 kg in FY06 to 131 kg in FY07. The main factors behind increase in demand of cement were: 60 percent higher Public Sector Development Projects (PSDP) allocation, seven percent GDP growth, The operating capacity of cement in FY05 and FY06 was 18 million and 21million tones, which rose to 37 million tones by the end of FY07. The cement manufacturers added eight million tones to the capacity and the total production was expected to be 45 million tones by the end of 2010.

 The export may reach to $ 500 million increase during 2008. The exports for FY08 have already surpassed the last whole years export of 3.19 million tones and are likely to reach to 6.67 million tones in 2008.

2.Automotive industry
Pakistan is an emerging market for automobiles and automotive parts offers immense business and investment opportunities. The total contribution of Auto industry to GDP in 2007 is 2.8% which is likely to increase up to 5.6% in the next 5 years. Auto sector presently, contributes 16% to the manufacturing sector which also is expected to increase 25% in the next 7 years. Car ownership in Pakistan has risen by 40% per annum since 2001.

3.

Textiles

The Textile Industry is dominated by Punjab. 3% of United States imports regarding clothing and other form of textiles is covered by Pakistan. Textile exports in 1999 were $5.2 billion. 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. 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.

4.

Communication

After the deregulation of the telecommunication industry, the sector has seen an exponential growth. 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 tele densities in the entire world. In addition, there are over 6 million landlines in the country with 100% fiber-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 2007-08 on account of the general sales tax, activation charges and other steps as compared to Rs 100 billion in the year-end 2006-07. By March 2009, Pakistan had 91 million mobile subscribers 25 million more subscribers reported in 2008. In addition to the 3.1 million fixed lines Pakistan is on the verge of a telecom revolution. Pakistani telecom sector has attracted more than $9 billion in foreign investments. During 2007-08, the Pakistani communication sector alone

received $1.62 billion in Foreign Direct Investment (FDI)

about 30% of the countrys total foreign direct investment. 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, 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 have a potential to absorb up to 50 million mobile phone Internet users in the next 5 years There are six cell phone companies operating in the country with nearly 90 million mobile phone users in the country. Telecom industry created of 80,000 jobs directly and 500,000 jobs indirectly.

The FADRAL BUREAU OF STATS provisionally valued this sector at Rs.982,353 million in 2005 thus registering over 91% growth since 2000.

5.Banking, finance and insurance

RANKING
Pakistan has been ranked 34 out of 52 countries in the World Economic Forum's first Financial Development Report, which was released in December, 2008by (CSF). Under Factors, Policies and Institutions pillar, Pakistan ranks 49th in institutional environment, 50th in business environment and 37th in Financial Stability. In the Financial Intermediation Pillar Pakistan ranks 25th in banks, 42nd in non banks and 17th in Financial Markets .Under Capital Availability and Access, Pakistan ranks 33rd.

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,

The provisionally valued this sector at Rs.311, 741 million in 2005 thus registering over 166% growth since 2000.

steel, machinery, tobacco, paper and paperboard, chemicals Food processing. The government is attempting to diversify the country's industrial base and to increase the emphasis on export industries. Small-scale and cottage industries are numerically significant but account for a relatively small proportion of the GDP at about 6 percent.

Small scale and cottage industries:

In wholesale trade, a small-scale company employs up to 100 workers, while in most manufacturing and mining activities, that number is between 500 and 1,500. In the services sector, a small-scale company is defined also by the annual turnover of up to $7 million. cottage industry: An industry where the creation of products and services is home-based, rather than factory-based. While products and services created by cottage industry are often unique and distinctive given the fact that they are usually not massproduced, producers in this sector often face numerous disadvantages when trying to compete with much larger factory-based companies.

Types of cottage and small-scale industries in Pakistan

There is a large variety of handicrafts available in Pakistan. They are not only aesthetically pleasing items, but they are also serve the needs of local people. These are as fallows:

Carpets
Carpets are by far the most in economic terms and the make a significant contribution to export earnings. They are generally hand-woven and hand knotted and made of wool and silk or a mixture of the two.

Embroidery
Embroidery has developed to a fine art with distinctive regional designs and patterns. Cutlery Wazirabad is the city of cutlery industry in Pakistan. This industry is growing day by day and has share of 65 million US dollars in Export for 2010. High Quality Damascus Steel (Pattern Welded Steel) is manufactured in this city and 95% of world needs are produced here.

Sports Goods
Sports goods earn about 3.7% of our total exports. The main raw material for the sports goods industry is leather and mulberry wood that are available in Punjab, but also imported PVC. Football Hockey ball Cricket bat and rackets

are mostly manufactured by hand. The skilled workers are available in Sialkot and Lahore. In the industry large and medium size factories contract work out to small scale and cottage concerns. Surgical Instruments Sialkot and Lahore are also noted for the manufacture and export of surgical instruments. The most important raw material is stainless steel which has to be imported. In this industry, also, medium scale factories contract work out to small scale and cottage concerns. Also like the sports goods industry, most of the output is exported.

Cottage and small-scale industries contribution to the gdp is only 5% Gov policy for small and cottage industries
The following organizations have been established to develop this sector of economy.

Pakistan Small Industries Corporation (PSIC) Punjab Small Industries Corporation (PSIC) Sindh Small Industries Corporation (SSIC) The Small Industries Development Board NWFP (SIDB) The Directorate of Small Industries Baluchistan (DSIB)