Industrial and export growth and diversification. Manufacturing sector has been growing
at 8.4% and its share rose from 14.7% in FY00 to 19.1% by FY07. To realize its growth targets,
industrial sector’s share in GDP has to rise to 30% and must be export led. The corner stone of
industrial growth and diversification strategy is to set in place programs to:
• Move up the value added chain in all key industries by developing capacities, skills and attracting
strategic partnerships and technology;
• Exploitation of mineral and other strategic resources of the economy;
• Modernization, enhancement and design innovation in the textile industry. Scale enhancement
could be achieved through foreign investment and joint venture/merger and acquisition. This would
enable the textile industry, currently accounting for one-fourth of Pakistan’s output and 69% of
exports, to withstand aggressive regional competition; and
• Developing backward and forward linkages of large scale industry with small and medium industry
that will help in improving productivity and competitiveness.
20. Export growth has been quite impressive, more than doubling to $18 billion over FY01-07.
Export Plan for 2006-20131 envisages a rise in export/GDP ratio from around 13% to 15% to generate
almost $40-45 billion of export revenues. The principal thrust of this strategy will be to promote export
diversification to reduce industry and exports vulnerability to textile sector. Substantial exploration is
underway to exploit Pakistan’s potential to promote:
• Agriculture exports efforts are underway to promote growth of minor crops and noncrop sector
particularly dairy sector where Pakistan is now the world’s fifth largest producer. Aside from
developing innovative guidelines for credit flows to the sector, efforts are underway to improve
agriculture marketing, grading and quality; establishment of agriculture export processing
zones with public-private partnership; encouragement of livestock development through cross
breeding, artificial insemination and embryo transfer technology. Also, there is scope for
expanding inland fish farms and developing in public: private partnership fish harbors etc.
• Pakistan, being the fourth largest cotton producer in the world after China, India and US, has
strong raw material and experience-edge in textiles. To augment capacities, industry invested
$5.5 billion over the FY99-FY05. There is further scope for a three to fourfold increase in
spindle and looms capacity and to diversify product (knitwear, bed ware and ready-made
garments) and market base and improve quality and design.
• In view of the relocation of industry and changing production and subcontracting
networks/hubs and alliances as newly industrialized economies move out of labor intensive
industries, Pakistan has an opportunity to serve as an alternate production center for
electronic, electrical, and engineering industry.
• Pakistan has made some inroads into the medium and high-end technology products such as
electronic goods and this area could be explored further.
1 Government of Pakistan, Planning Commission: Export Plan –Pakistan Inc. 2007.
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• Mineral is another sector where Pakistan has large potential given its copper, high quality
granite and marble and gem reserves.
• Finally, information technology (IT) and other services sectors which constitute 55% of GDP
have a role to play in enhancing exports and can be nurtured by promoting venture capital
and private equity funds and enhancing the skill base of population in this area.
21. Infrastructure. To enhance the competitiveness of Pakistan’s industry and exports, it is
however critical to bridge infrastructure gaps. The Government has developed a broad based strategy
and short, medium and long term plan for energy sector. Pakistan has good domestic reserves of oil,
gas and other fuels and hydro potential. The investment requirements and opportunities arising from
a well designed and integrated energy security plan that offers an Asian Energy Corridor are
enormous. Potential within this corridor exists for mega projects that involve development, sharing
and trading of energy resources between the largest producers of oil and gas in the Central Asian
Republic and Middle East to the deficit countries including China, India and Pakistan.
22. To ensure energy security and sustainability, Pakistan’s energy plan recognizes the growth in
domestic demand for energy that has to be catered by exploitation and development of balanced
energy mix with maximum reliance on indigenous and environment-friendly resources, besides
tapping the regional resources. Recognizing this, Pakistan plans to
(i) Optimize energy mix between hydel: thermal from existing levels of 28:72 to 39:61 in the years
ahead by exploiting all key sites with substantial hydel generation potential – this program will
help in fuel substitution and energy efficiency resulting in savings of oil imports;
(ii) Enhance exploration and development of gas reserves. Gas supplies are to be supplemented
by exploiting cross border energy transaction through Iran-Pakistan-India pipeline,
Turkmenistan and Qatar-Pakistan pipelines and import possibility of LNG;
(iii) Unleash coal potential given the large measured reserves estimated to 3,300 million tons with
substantially large inferred reserves. Major deposits are in Sindh province in Thar though
other pockets also are showing promising signs; and
(iv) Exploit renewable energy resources.
23. Investment requirements for key infrastructure programs were estimated to be in the range of
$39 billion for 2005-2010. Over the long term, investment requirements will be staggering as, by some
estimates, the aggregate power generation requirements alone will be around 143,310 MW during
2005-2030. Since 1994, generation has been largely in private sector and WAPDA – the largest utility
company of Pakistan – has been unbundled by spinning off the regional distribution companies which
are to be privatized. Given fiscal constraints, Pakistan has scope for limited public investments so
bulk of the new development projects is to be available for private investment. The Private Power
Infrastructure Board has floated 45 projects of 12 GW in pipeline, involving cost of close to $11 billion.
24. Independent Power Producers (IPP) are generating 6005 MW, with remaining 13,083 MW MW
generated by WAPDA and KESC. IPP have made significant progress (excluding Hubco outside
Power Sector Policy framework) though 66% of the total capital requirements were met from official
debt sources. Drawing from the lesson learnt of past power sector policy, the 2002 Power Sector
Policy set prices based on cost structure of the project as determined by the regulator. Pricing policy
allow pass through of items such as the fuel price, interest rate and exchange rate.
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25. Pakistan needs $1 billion per year for new dams and related infrastructure, and $5 billion per
year for transport infrastructure etc. In road sector, the Medium Term Development Program includes
plans to improve 14000 km of existing road and construct 7000 km of new road. Pakistan has
managed to promote public-private partnership for a highway project on BOT basis for Lahore-
Faisalabad 4 lane divided express way on 25 year concession agreement. The National Trade
Corridor is one of the strategic integrated projects that aims to develop trade route from ports in south
of Pakistan to northwest towards Afghanistan and Central Asian Republics and will carry 500 million
tons of freight up the north-south route and another 50 million tons of international freight. Aside from
expansion of two ports in Karachi city, commissioning of Gawadar port, awarded to Port of Singapore
for management and operation. Located at the mouth of the Persian Gulf and outside the Straits of
Hormuz, this port will serve as a regional hub for energy transportation.
26. The Government has now developed a policy and legal framework for the Public Private
Partnership (PPP) which will be supported by the Infrastructure Project Financing Facility (financed by
the Government and Multilateral Development Banks). A Project Development Fund will help identify,
prepare and procure PPP projects to support economically viable projects, mobilize private capital
resources and float the corporate and infrastructure bonds. To support delivery of basic services,
public funding will complement and replace user fee to the extent feasible to facilitate viability gap
funding along with a supportive risk management framework.
27. Improving Productivity. Pakistan is structuring a number of initiatives to allow for
enhancement in total factor productivity growth which has been key driver of East Asian economic
growth. Besides encouraging higher enrollment accompanied by improvement in standards in each
of the education tier, investments are being made to (i) enhance vocational and technical education
which thus far only caters for requirements of one percent of 15-23 years age cohort; (ii) open six
foreign sponsored Universities to augment supply and quality of higher education in the country; and
(iii) enhance SME and industry entrepreneurial skills. Supplementary efforts are underway to
develop strong integrated linkages between technology and R&D needs of industrial sector and
science and technical education.
28. Conclusion. Pakistan has great potential, both in terms of its natural and human resource,
and has developed fairly good forward looking development agenda and plans. A major
breakthrough in industrial and export diversification depends, among others, critically on
reinvigorating agriculture sector and ensuring adequate availability of infrastructure to meet the
growing economic requirements. Given huge domestic demand and high returns in virtually every
sector, there has been a strong interest in Pakistan’s economy as illustrated by the strong foreign
investment that has come from both GCC and West. The region given its diversity and richness of
resources – with Gulf countries accounting for large proportion of world’s oil and gas proven reserves
and now holding sizeable world foreign exchange reserves – along with Pakistan’s large agriculture
and growing industrial base, domestic market, skilled labor force which, if effectively, exploited offers
opportunities for deepening collaboration and cooperation for mutual advantage. The new
Government given its strong political backing has the opportunity to restore macroeconomic stability
disrupted in last couple of years which should help restore investor confidence and allow country to
attract non-debt creating flows critical for development of industry and infrastructure sectors and to
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