UNIT 9 — INDUSTRIAL DEVELOPMENT

Secondary & Tertiary Industries | Pakistan Studies Notes

Huma Naz Sethi — 7th Edition

1. SECONDARY INDUSTRY
Secondary industry transforms raw materials (from the primary sector) into semi-finished or finished
products. It is a system of inputs, processes, and outputs.
Inputs
• Capital — finance to set up and manage factories
• Enterprise — business skills to develop and market products
• Land — location of the industry
• Raw Materials — basic commodities transformed by industry
• Power — energy used in production
• Labour — workforce with required skills

Outputs
• Processed goods: cement, cotton yarn, sugar, wheat flour
• Manufactured goods: cotton cloth, bottles, steel sheets
• Final products: drugs, fans, garments, motorcycles, tractors
• Construction outputs: factories, hospitals, schools

Factors Influencing Industrial Location

A factory is located where costs of assembling inputs, producing goods, and distributing to markets
are minimised to allow maximum profit.

Factor Key Consideration

Site requirement Cheap flat land, well-drained, size meets needs
Natural routes Land/sea routes for cheap transport of materials and goods
Access to market Distance & cheapest transport form to market
Raw material availability Sufficient supply, affordable price, reliability
Skilled labour Workers with required skills nearby
Power supply Available at affordable cost
Industrial linkage Other industries nearby to benefit from
Capital Finance available for development
Government policies Incentives offered to set up new industry

Raw Materials
• Primary resources: crops, animal products, fish, timber, water, minerals
• Agro-based industries use agricultural products (cotton, sugar, wool)
• Pakistan has insufficient raw materials for some industries (oil refineries, iron and steel,
fertilisers, car assembly) — these must import raw materials, raising the import bill
• Metallic minerals: gold, silver, iron, copper
• Non-metallic minerals: limestone, gypsum, marble, rock salt
2. COTTON TEXTILE INDUSTRY
Pakistan's LARGEST industry, employing 40% of industrial labour force. Main centres: Karachi,
Hyderabad, Faisalabad.

Importance
• Forms nearly 65% of total exports
• Employs large numbers of people
• Contributes ~8.5% of GDP through indirect taxes
• Value-added products earn more foreign exchange than raw cotton
• Uses local raw material — reduces dependence on imports
• Promotes raw cotton production and increases farmers' income

Location Factors

City Key Location Factors

Karachi Labour from all over Pakistan; port saves transport cost on machinery; large
domestic market; power from Korangi, KANUPP, Bin Qasim; efficient
transport links; capital available
Faisalabad Close to cotton belt of Punjab; labour from adjoining areas; large local
market; favourable government policies
Hyderabad In cotton-producing areas of lower Sindh; large local market; near Karachi
port for machinery import/product export

Problems / Disadvantages
• Periodic shortages of raw cotton due to leaf-curl virus
• Recession in international markets
• Competition from South Korea, Egypt, Taiwan, Hong Kong, Thailand
• Outdated machinery needs replacement
• Frequent power breakdowns raise production costs
• International restrictions due to child labour and environmental issues
• Poor roads, rail delays, and political instability affect production
• Frequent government policy changes lower investor confidence
• Terrorist activities and uncertain political conditions led to factory closures

3. SUGAR INDUSTRY
Sugar is mainly made from sugarcane. Sugar mills are located in Punjab, KPK, and Sindh.
Balochistan has NO sugar mills.
Why Mills Must Be Near Fields
• Sugarcane loses sugar content as soon as it is harvested — must be crushed immediately
• Sugarcane is bulky and heavy — expensive to transport

By-products
• Bagasse — used as fuel in sugar mills; to make chipboard, paper, animal feed
 • Molasses — used to manufacture acids in the chemical industry

4. FERTILISER INDUSTRY
Essential for Pakistan's agricultural development. The most widely used chemical fertiliser is UREA
— adds nitrogen to soil, speeds up crop growth, increases protein content.
• Three-quarters of fertilisers used on wheat, cotton, and rice
• Raw materials: sulphur, phosphate, gypsum, and natural gas (main raw material)
• Produced ~8 million tonnes per year in 21 factories (2018)
• Fertiliser plants located near gas fields or pipelines (e.g., Mari gasfield, northern Sindh)
• Agriculture is so important that government provides tax breaks and subsidises farmers on each
bag
• 100% of production used for home consumption; imports make up ~20%
• Problem: competition for gas with power stations and homes; Mari reserves estimated to last
only 8–10 more years

5. CEMENT INDUSTRY
Favourable Factors for Location
• Availability of raw materials: limestone and gypsum
• Good domestic market — high demand from construction industry
• Natural gas is cheap fuel
Main locations: Faisalabad, Daud Khel (Punjab), Haripur (KPK), Dharki (Sindh).

6. STEEL INDUSTRY
Pakistan Steel Mill Corporation established in 1973 at Pipri (40 km east of Karachi, Gharo Creek near
Port Qasim) with technical/financial help from USSR. Closed in 2015 due to high running costs.

Why Steel is Important

• Essential for bridges, power lines, dams, construction
• Used in machinery, autos, electrical goods
• Vital for economic development

Why Located at Pipri

Factor Reason
Site Flat, cheap, unused land next to Gharo Creek
Natural Routes Port Qasim has natural harbour for imports/exports
Capital USSR provided technology and capital
Raw Materials Iron ore/coking coal imported through Port Qasim; limestone from Murti
Hills (Thatta); fresh water from Lake Haleji (50 km away)
Energy Korangi (15%) and Pipri (21%) thermal power stations; Karachi Nuclear
Power Station
Labour Skilled and unskilled available locally from Karachi
Markets Many steel-using industries in Karachi; over half of steel produced used in
Punjab
Transport Pipri connected to Karachi-Kotri railway and main roads

Heavy Mechanical Complex (HMC), Taxila

• Established 1979 with Chinese assistance
• Designs and manufactures industrial plants and machinery
• Heavy Forge Factory (HFF): crucial for defence, hydro, thermal, oil/gas, chemical plants
7. INDUSTRIAL ESTATES & SPECIAL ZONES
Industrial Estates
Areas reserved for industry only, to encourage entrepreneurs. Government provides infrastructure:
metalled roads, electricity, water, gas, hospitals, sanitation.
• First industrial estate: Sindh Industrial Trading Estate Limited (SITE), Karachi — 1947
• Sindh has the MOST industrial estates (proximity to Karachi, largest city and port)
• Incentives: exemption from customs duty on imported machinery

Province No. of Industrial Estates

Sindh 24
Punjab 20
Khyber Pakhtunkhwa 15
Balochistan 10
Federal Capital 3
TOTAL 72

Special Industrial Zones (SIZs)

• Planned to support manufacture and trade of export products
• Attract local and foreign investors
• Incentives: tax exemptions on machinery, relaxation of foreign exchange control, simplified
procedures, tax holidays and security
• Under CPEC: 37 Special Economic Zones (SEZs) planned across four provinces
• CPEC aims to strengthen manufacturing, increase export competitiveness, lower costs, develop
iron/steel, chemicals, pharmaceuticals, engineering sectors

8. GOVERNMENT INDUSTRIAL POLICY SINCE

INDEPENDENCE

Period Policy Key Features

1947–71 Private Sector / PIDC established; liberal tax concessions; protection from
Industrialisation foreign competition; export bonus scheme; loans for
industry; 1960s = 'Era of Industrialisation'
1972–77 Nationalisation (Z.A. 10 basic industries transferred to public sector (iron/steel,
Bhutto) cement, chemicals, petrochemicals etc.); major blow to
private sector; slow industrial growth; foreign investors
discouraged
1977–88 Denationalisation (Zia Nationalised industries returned to owners; public sector
ul-Haq) share reduced to 19.5%, private to 80.5%; no further
nationalisation promised
1988 Privatisation Privatisation of State Owned Enterprises (SOEs) since
onwards 1991; liberalisation and deregulation; government helps
create economic opportunities
Objectives of Privatisation
• Better opportunities for private sector expansion and modernisation
• Improve productivity and profitability
• Reduce burden on government's economic resources
• Facilitate economic activities for the private sector
• Achieve more rapid industrialisation
9. FORMAL AND INFORMAL SECTORS

Formal Sector Informal Sector

Employed by institution Self-employment
Capital intensive, few workers Labour intensive, mainly hand tools
Generally mechanised Very few modern machines
Regular working hours & certain wages Irregular hours & uncertain wages
Guaranteed standard of quality Often low standard of quality
Located in offices/factories Work done at home or on streets
Legal and registered Often non-registered
Normally males Mostly females and children

Importance of Both Sectors

• Provide industrial goods to meet domestic market needs
• Generate employment in the industrial sector
• Informal sector uses domestic raw materials — no import burden
• Products of both sectors are exported, earning foreign exchange

Informal Sector: Advantages

• Meets local demand with low-priced industrial goods
• Provides employment to a large number of people
• Makes use of local raw materials — no import burden
• Industrial waste can be used to produce more goods
• Provides door-to-door supply of everyday items

Informal Sector: Disadvantages

• Not registered with government — no revenue/taxes
• Sometimes produces sub-standard goods
• Little potential for growth due to limited capital and unskilled labour
• Encourages child labour — children deprived of education
• Health problems for workers — labour laws not followed
• Workers receive low wages; uncertain/unreliable employment

10. COTTAGE / CRAFT AND SMALL-SCALE INDUSTRIES

Most villages are self-sufficient in basic necessities. Cottage industries hold an important position in
the rural economy. Many families depend on these for income.
Why Encourage Cottage and Small-Scale Industries?
• Labour intensive — provide employment to 80% of industrial labour force
• Women can work at home — increases active labour force
• Meet local demand and save foreign exchange
• Demand for rugs, carpets, brassware, handicrafts in international markets — provide 30% of
export receipts of manufacturing sector
 • Reduce rural-to-urban migration
• Reduce regional disparity in income (under-developed districts)
• Effective use of local raw materials — promotes primary industries
• Less capital and less sophisticated technology needed
• Do not use imported material or equipment
• Waste of large-scale industries (cotton, sugar, steel) can be used for by-products

Key Industries
• Sports Goods (Sialkot): rubber, wood pulp, thread, leather — exported worldwide; child labour a
major issue
• Surgical Instruments (Sialkot & Lahore): 95% of instruments exported; exports Rs. 20 billion-
worth per year; ~25% of total world market; child labour issue
• Brick Kilns (Punjab mainly): clay, water, coal, child/Afghan refugee labour; major pollutant —
CO, SO2, nitrogen peroxide; Pak-EPA wants switch to natural gas
• Handicrafts: carpets, textiles, embroidery, jewellery, ceramics, woodwork, metalwork

Problems of Cottage and Small-Scale Industries

• Contribution to GDP is only 5%
• Limited profits — no extra capital for expansion
• Economies of scale not possible — cannot compete with large-scale goods
• Lack of standardisation and quality control
• Outdated production methods and machinery
• Wholesalers exploit owners — goods sold at cost price
• No electricity in rural areas; power breakdowns damage electric motors
• Limited provision of technical advice and training

Government Policy Towards Small-Scale Industries

• Pakistan Small Industries Corporation (PSIC)
• Punjab Small Industries Corporation (PSIC)
• Sindh Small Industries Corporation (SSIC)
• Small Industries Development Board KPK (SIDB)
• Directorate of Small Industries Balochistan (DSIB)
Measures taken: establishing industrial estates, providing marketing facilities, technical service
centres, handicraft development centres, carpet centres, pre-investment counselling, local and foreign
loans on easy instalments.
11. INDUSTRIALISATION AND ENVIRONMENTAL
CONCERNS
About 8,000 industrial units contribute to high levels of environmental pollution. About 90% of
chemical, dyeing, and tanning units operate WITHOUT treatment plants.

Effects of Industrial Pollution

• Atmospheric & aquatic pollution: chemical units, brick kilns, factories cause asthma, lung
cancer, skin diseases, cardiac problems
• Ground water contamination: toxic chemicals pumped up untreated cause stomach and
intestinal problems
• Noise pollution: machinery causes deafness and irritability
• Solid waste: dumped in industrial cities, burned — produces toxic fumes affecting thousands
• Marine life deterioration: chemical waste from Korangi into sea; marine life contaminated with
lead — causes anaemia, kidney failure, brain damage
• Mangrove forests threatened — shipping discharges and spills; mangroves provide nutrients,
habitat for fish, birds, reptiles
• Sea water: 135 km of Karachi coastline severely polluted — industrial, port, urban, agricultural,
transportation activities
• Karachi Port: greatest pollution — ships pump bilges illegally; export industries release
untreated effluents into sea
• Municipal and industrial waste water used to irrigate crops — harmful for crops

How to Control Industrial Pollution

• Enforce efficient disposal mechanism for industrial waste
• Government should facilitate import of machinery for treating industrial waste
• Strict enforcement of laws — companies must not dump waste in Arabian Sea
• Educate people about hazards; EPA and NGOs to create awareness
• Pakistan Environmental Protection Act (PEPA) 1997 and National Environmental Quality
Standards (NEQS) established
• Plant more trees — best safeguard against high pollution (shield from poisonous gases)
• Industries in congested areas should be shifted away from residential areas

Sustainable Industry Requires:

• Conservation of existing non-renewable resources; development of renewable energy
• Sustainable agriculture to provide raw materials
• Skill-enhancing working conditions — in-service training programmes
• Safe working conditions and economic security to maximise production
• Efficient use of technology — reduce waste or use for generating electricity
• Conservation of environment through recycling
• Safe disposal of toxic industrial waste
• Sustainable development of tertiary sector (transport, banking, insurance)
• Political stability for favourable investment climate
• Exploration of new market opportunities through market research and quality control
12. TERTIARY INDUSTRY — TOURISM
Tertiary industry provides a service. Before COVID-19 it was the world's fastest growing industry,
contributing 10% of world GDP and supporting 330 million jobs globally.

Factors for Developing Tourism in Pakistan

1. Tourist Attractions
• Adventure/sports tourism: trekking, climbing, skiing
• Nature/wildlife tourism: national parks, wildlife sanctuaries
• Cultural tourism: historic sites, Pakistan's heritage

2. Security
• After 9/11, tourists were reluctant to visit Muslim countries
• Attack on Sri Lankan cricket team (Lahore, 2009) stopped foreign cricket teams
• By 2015 Pakistan overcame security problems; international cricket resumed; tourism picked up

3. Infrastructure and Transport

• Tourists need hotels, electricity, water, hospitals, food, sewage-disposal systems
• Increasing number of five-star hotels in major cities
• New roads and airports have made tourist areas more accessible

4. Capital
• Availability determines level of development
• More is spent on advertising than on infrastructure — inadequate

5. Marketing and Publicity

• Pakistan Tourism Development Corporation (PTDC) established 1970
• Aims: promote Pakistan as tourist-friendly destination; encourage tourist businesses; develop
infrastructure
• National Tourism Coordination Board (NTCB) formed November 2018
• Pakistan ranked on Condé Nast Travellers list of best holiday destinations for 2020

6. Government Priorities
• NTCB restructured PTDC in March 2019
• Khyber Pakhtunkhwa set up its own tourism authority and first tourism app
• 33% quota for women in KPK tourism police

Types of International Visitors

• Business visitors (from Europe and USA): trade delegations, educational activities, multinational
company staff, UN officials
• People visiting relatives (mainly from Saudi Arabia, Kuwait, UAE, UK, USA)
• Foreign tourists (for recreation): mainly interested in northern areas
Advantages of Tourism
• Creates new job and employment opportunities
• Stimulates trade — especially service and small business sectors
• Provides new infrastructure needed to support tourism
• Increased regional development in isolated areas
• Greater tax revenues — government can improve housing, schools, hospitals
• Helps reduce migration to other countries
• Creates goodwill; develops cultural linkages

Disadvantages of Tourism
• Natural environment badly affected (e.g., deforestation in Kalam/Swat Valley, water usage,
littering, air pollution)
• Tourism destroys local culture and traditions; crime, drugs, drunkenness
• International tourists book in home country — limited spending reaches Pakistan; profits from
multinational hotel chains may leave
• Seasonal jobs — rest of year people look for other work
• Vulnerable to external shocks: terrorism (2000s) and COVID-19 devastated tourism

13. NATURAL ATTRACTIONS OF PAKISTAN

Northern Areas
Heights between 1000–8000+ metres. Valleys: Gilgit, Hunza, Skardu, Chitral, Swat, Kaghan —
unique flora and fauna. Paradise for mountaineers, trekkers, hikers.
Key Valleys
• Kaghan Valley (KPK): Brown trout fishing, Saiful Maluk Lake (3211m), Shogran village, Gujar
herder families
• Swat Valley: Rushing torrents, lakes, orchards, flower-decked slopes
• Gilgit Valley (1453m elevation): Scenic beauty; polo is favourite sport; season May to mid-
October
• Skardu (capital of Baltistan): Season April–October; max 27°C, min 8°C; starting point for K2
expeditions
• Hunza Valley (2438m elevation): People noted for longevity; mostly Ismaili; Burushashki
language; Baltit Fort (600 years old)
• Chitral: Cut off in winter; famous Kalasha valleys (Bumboret, Rumbur, Birir); Polo Festival at
Shandur

Cultural Attractions
• Archaeological sites: Mohenjo-daro (Larkana, Sindh — discovered 1922), Harappa (Indus
Civilisation), Taxila (Gandharan-Buddhist)
• Historic sites: forts (Baltit), Khyber Pass, Badshahi Mosque, Muhabat Khan Mosque
(Peshawar), Shah Jahan Mosque (Thatta), Shalimar Gardens (Lahore), tombs of Chaukandi
and Makli (Thatta), Allama Iqbal and Ranjit Singh (Lahore)
• Modern buildings: Faisal Mosque, Parliament Building, Presidential Palace (Islamabad); Minar-
e-Pakistan (Lahore); Jinnah Mausoleum (Karachi)
• Salt mine at Khewra
• Traditional crafts and bazaars
• Pakistan has 6 UNESCO World Heritage Sites (Lahore Fort and Shalimar Gardens among
them; Badshahi Mosque waiting for approval)
14. CALL CENTRES
A call centre is the office of an organisation which handles telephone calls to/from one or more
companies. It filters calls and forwards them to qualified agents called agents.
Call Centre Business in Pakistan
• Government policy: call centres serve domestic and offshore companies
• Access normally through 0800 Free Phone Numbers
• Typical services: airline bookings, banking, hotels, medical services, insurance, data entry
• Located in: Karachi, Lahore, Rawalpindi, Islamabad, Faisalabad, Peshawar
• PTCL provides connectivity for call centres

Why Call Centres Can Provide Employment

• Enormous growth potential — good source of revenue
• Low labour rates in Pakistan compared to developed countries
• Educated class has sufficient knowledge of English

Limitations of Call Centre Employment

• Only cater for urban areas — 67% of Pakistan's population is rural with no access
• Very few workers needed to operate the computer system — large-scale employment not
possible
• Only computer-skilled workers qualify — specialised software required
• Expansion closely linked to growth of business/industry — recession = fewer call centres
QUICK REFERENCE — KEY FACTS TO REMEMBER

Industry Key Facts

Cotton Textile Largest industry; 40% of labour force; 65% of total exports; 8.5% of
GDP; main centres: Karachi, Faisalabad, Hyderabad
Sugar Raw material = sugarcane; in Punjab, KPK, Sindh; NO mills in
Balochistan; by-products = bagasse + molasses
Fertiliser Main chemical = UREA; main raw material = natural gas; ~8 million
tonnes/year; 100% used domestically
Cement Raw materials = limestone + gypsum; main centres = Faisalabad,
Daud Khel, Haripur, Dharki
Steel Established 1973 at Pipri (near Port Qasim); USSR assistance;
HMC Taxila = heavy machinery
SITE First industrial estate, Karachi, 1947; total 72 estates in Pakistan
Tourism PTDC = 1970; NTCB = 2018; ~2 million foreign tourists (2018); 6
UNESCO World Heritage Sites
Surgical Instruments Sialkot & Lahore; 95% exported; 25% of world market; Rs. 20
billion exports/year
Sports Goods Sialkot; rubber, wood pulp, leather, thread; Sialkot selected for
1998 World Cup footballs
Brick Kilns Mainly Punjab; clay + coal + child labour; major air pollutant; Pak-
EPA wants natural gas switch

Policy Period Government Action

1947–71 Private sector focus PIDC; industrial estates; tax concessions;
Era of Industrialisation
1972–77 Z.A. Bhutto Nationalisation of 10 basic industries
1977–88 Zia ul-Haq (Martial Law) Denationalisation; return to private sector
1988–present Liberalisation era Privatisation of SOEs since 1991;
deregulation

GOOD LUCK IN YOUR EXAM! — Ahmed