1. Industrial Policy

2. Objective Study the process of industrialization during:
The Zia period;
Post-1988 era

3. Backdrop In the Zia era, Pakistan witnessed:
Return of growth rates
Increased role of private sector
Post-Zia period is distinct both politically and economically
Return to democracy ( )
A great deal of continuity in policy
Structural adjustment programs
Pakistan’s economic program since 1988 has totally capitulated to the requirements of IMF and World Bank
Despite frequent changes in the government, the economic program stayed more or less the same

4. Industrial Performance during Zia Years
During , GDP growth rate = 6.5% pa
Manufacturing GDP grew at 9.5% pa between
Investment in medium and large scale industry grew at 18.2% pa

5. Industrial Policy ( )
‘Only epoch in Pakistan’s history when an industrial policy was formulated and executed for any length of time’
77-81:
Cautious attempts at dismantling existing government policies and restoring private sector’s confidence, while simultaneously trying to gain political legitimacy

6. Industrial Policy (1977-88) 82-85:
A more forceful drive towards Islamization which followed the regime’s consolidation of power
Attempt to disengage the government from direct political control of the economy.

7. Industrial Policy ( )
Private sector was to play the leading role in the industrial sector
Some specific features of the industrial policy:
Denationalization
Agro-based industry
Small engineering units
Chemical and cement industries
Export rebates
Reduction in interest rates
Easing of economic controls and regulations, including procedures for sanctioning of private sector investment.

8. Industrial Policy (1977-88) Deregulation and Liberalization:
Sixth five year plan seen as a departure from government’s earlier policies on industry.
For the first time emphasis moved from purely sectoral investment planning to one which also incorporated incentives and institutional reforms to enhance the efficiency of the industrial sector.
Export-led industrialization was mentioned as a policy goal for the first time
Emphasis on moving manufactured exports towards higher value added.

9. Industrial Policy ( )
Difference between export-led and import-led industrialization.

10. The Age of Structural Adjustment: 1988 onwards
Adoption of SAP had a significant influence on industrial sector.
SAP: access to an extended fund facility from IMF as well as sectoral loans from the World Bank in exchange for many structural adjustments in the economy
Major emphasis of structural adjustment program was on enhancement of growth by encouraging the private sector

11. The Age of Structural Adjustment: 1988 onwards
IMF/World Bank’s induced conditionality ( ) outlined the following industrial policy for the government:
De-regulation
Reducing the level of protection accorded to different industries
Reducing the list of restricted import items & those subject to quantitative restrictions.

12. The Age of Structural Adjustment: 1988 onwards
Apart from these industry-specific recommendations, IMF’S macroeconomic prescriptions had a direct impact on industrial development
Increase in level of indirect taxation
Withdrawal of subsidies on gas, electricity, telephones and fertilizers
Increase in producer prices of crops and petroleum products
Reduction in public sector development spending
Restriction on government borrowing and concessional credit to private sector.

13. The Age of Structural Adjustment: 1988 onwards
The debate on credit allocation to industry
Multi-lateral financial institutions: The use of concessional and targeted financing distorts capital allocation and causes financial repression.
Level of exports determined by competitiveness, quality, tariff policy, and exchange rate policy.
Interest rate subsidies cannot compensate for lack of competitiveness, poor quality, - only creates further distortions.

14. The Age of Structural Adjustment: 1988 onwards
Pakistani planners:
Local machinery manufacturing and the export sector have relied heavily on concessional financing.