Countries of the World/COUNTRYS.BIN/dp/0274/02742.txt

Text File | 1991-06-25 | 37KB | 572 lines

$Unique_ID{COW02742}
$Pretitle{248}
$Title{Pakistan
Chapter 3D.   Mining and Quarrying}
$Subtitle{}
$Author{Darrel R. Eglin}
$Affiliation{HQ, Department of the Army}
$Subject{fy
percent
imports
manufacturing
million
exports
government
foreign
pakistan
credit}
$Date{1983}
$Log{Carpet workers*0274201.scf
}
Country:     Pakistan
Book:        Pakistan, A Country Study
Author:      Darrel R. Eglin
Affiliation: HQ, Department of the Army
Date:        1983

Chapter 3D.   Mining and Quarrying

     Exploration of the country's mineral resources has barely started. In FY
1983 mining and quarrying contributed only about 1 percent of GDP, although
this was about double the share a decade earlier. The increase was largely the
result of increased gas and crude oil production. Slow development of other
mining was partly the result of inadequate mapping and exploration and the
difficulty of access and lack of infrastructure where exploitable minerals
were found. Other constraints included the absence of risk capital, the large
capital requirements of most mining projects, an inadequate institutional
framework, and limited demand for such products from domestic industries.
Private investors, including foreign companies, can obtain concessions for
mineral extraction.

     A number of minerals have been discovered. Officials reported large
reserves of chromite, over 430 million tons of iron ore, 74 million tons of
bauxite, 412 million tons of copper, 21,000 tons of antimony, large reserves
of molybdenum, 800,000 tons of sulfur, and large quantities of limestone,
marble, sand, rock salt, and clays for ceramics. This was only a partial list.
Much of the mineral wealth was in Baluchistan. Some iron-ore deposits
reportedly were of good quality for use in the country's new steel plant, but
in 1983 iron ore was not mined, and supplies were imported. Chromite was the
major mineral mined and exported, but low international demand kept exports
substantially below the early 1970s. A number of public companies were
responsible for extraction and sale of minerals.

     The Saindak Integrated Mineral Project was a major mining development
effort under way in 1983. Located in Baluchistan, the project area contained
three separate large deposits of copper ore, iron ore, sulfur, gold, silver,
and molybdenum. In 1983 the estimated worth of the minerals in reserves was
US$9.3 billion, and the value of annual production when the project was
completed was estimated at US$130 million (in 1983 dollars). Total cost of the
project was US$400 million. The state-owned Resource Development Corporation,
formed in 1974 to develop the Saindak discoveries, had offers under
consideration in 1983 from foreign firms for equity participation.

Manufacturing

     Nearly all of the country's manufacturing capacity has been installed
since partition. The area that became Pakistan was almost completely a
supplier of agricultural products that were processed in India or elsewhere
under British rule. Local small-scale processing and cottage industries were
about all that existed before partition.

     The pace of industrialization has been remarkable. During the 1950s
manufacturing expanded at about 16 percent a year and during the first half of
the 1960s at around 11 percent a year. The pace slowed to under 7 percent a
year in the last half of the 1960s. Between FY 1970 and FY 1977 the index of
manufacturing output increased an average of only 2.3 percent a year. Between
FY 1977 and FY 1982 the index rose an average of 9.9 percent a year.
Manufacturing output grew about 8.3 percent in FY 1983 on the basis of
preliminary data. Although the country achieved rapid industrialization, the
variations in rates of growth reflected the impact of numerous factors. There
were hints that the resumption of substantial growth of manufacturing after
1977 might be short-lived.

     Diminishing trade with India following partition, and its termination in
1949 when Pakistan refused to devalue its currency along with the British
pound sterling provided a powerful stimulus to industrialization into the
1960s because of an overvalued Pakistan rupee. Governmental policy measures
provided low-interest loans, liberal tax incentives, import licenses for
machinery, and restrictions on imports of manufactured consumer goods to spur
industrialization. Curbs on labor and low prices for basic necessities helped
keep wage costs down, while cheap raw materials, particularly cotton and jute,
added to the profitability of manufacturing activity. Government investment in
infrastructure facilities encouraged private industrial investment. The
government also built some large plants, some of which were sold to private
investors after their profitability had been proved, thereby exempting the
private sector from risk taking in such cases. In the first half of the 1960s
massive infusions of foreign aid to industrial projects offset the declining
importance of factors dominant during the 1950s. A favorable atmosphere
stimulated industrial investment and production up to the mid-1960s.

     After the mid-1960s the atmosphere changed, and the pace of
industrialization slowed considerably. Much less foreign industrial aid became
available after the 1965 war with India. Domestic manufacturing had
substantial excess capacity. Local manufacture of substitutes for imported
consumer goods encountered the limits of domestic demand, which was greatly
reduced when the East Wing became Bangladesh. Extensive protection from
foreign competition produced few industries capable of turning to export
sales. The nationalizations under the Bhutto regime caused private industrial
investment to fall sharply, and public investment failed to compensate. The
major devaluation of the rupee in 1972 greatly altered costs and prices for
Pakistani industrialists.

     After 1977 Zia's government attempted to encourage resumption of private
investment in the manufacturing sector. Several of the nationalized plants
were returned to private ownership. In 1979 an order called the Protection of
Rights in Industrial Property Order was issued, setting forth limited
conditions under which industrial property could be nationalized and the
procedures for ensuring adequate compensation to former owners. The area of
public industrial monopolies was defined, and little manufacturing was
reserved for exclusive public ownership. A new financial institution was
formed to facilitate financing of private industrial investments. A sizable
and expanding series of fiscal and financial incentives, some of which were
targeted for specific industries or geographical areas, was provided to spur
private investors. The efforts were partially successful. By FY 1982 private
investment in manufacturing in real terms had increased by nearly three times
over the low point in FY 1975, but private investment (in constant prices) was
still barely above the level of 1971. Public investment, however, had been
falling faster. Total real investment in industry fell about one-third between
FY 1978 and FY 1982. Unless private investment became more responsive, there
was a threat to the modernization and growth of the manufacturing sector in
the immediate future.

[See Carpet workers: Karachi. Courtesy Kay Muldoon, WORLD BANK]

     Industrialization in Pakistan has meant primarily the installation of
large-scale manufacturing plants to fill the void that existed at partition.
By the early 1980s large-scale manufacturing contributed over 80 percent of
the value added by manufacturing and accounted for more than 90 percent of
total investment in the sector. But by their nature, large-scale plants tended
to be capital intensive. Employment in large-scale manufacturing was less than
3 percent of the labor force and had failed to grow fast enough to absorb an
increasing part of the annual additions to the total labor force. The Census
of Manufacturing Industries for FY 1976 (the latest available in late 1983)
showed 3,248 large-scale manufacturing establishment